Tim Fraser
It's a huge and intriguing what-if: Could Nortel Networks Corp. have survived as a technology champion if it had approached Ottawa for a bailout while draping itself very publicly in the Canadian flag?
In other words, might the outcome have been different if Nortel chief executive officer Mike Zafirovski had acted more like Jim Balsillie, the co-CEO of Research In Motion Ltd., who is always ready to play the nationalist card for business ends?
Mr. Zafirovski himself raised that question yesterday, indicating a save-Nortel-the-Canadian-company offensive was discussed as his executive team explored ways of rescuing the domestic telecommunications giant in late 2008 and early 2009.
The idea was rejected because "that's not a personal style - that's not Nortel's style," Mr. Zafirovski said in an interview.
Still, it just might have worked. About the time Nortel filed for bankruptcy protection on Jan. 14, a publicity campaign extolling the company's crucial importance for Canada - especially as a provider of high-end jobs and intellectual property - would have been hard for the Conservative government to ignore.
But that is 20/20 hindsight, said Mr. Zafirovski, and the option was never really pursued. The federal government turned down the bailout and Nortel is being sold off in pieces.
For Mr. Zafirovski, 55, a veteran U.S. turnaround manager who had joined Nortel in November, 2005, it remains one of the few uncertainties about his role in the dismantling of the 124-year-old company.
In his view, he made the best of a situation that turned very bad late last year, as Nortel grasped the peril of a potential fire-sale liquidation.
"In the second half of 2008, many very strong companies got hurt badly," he said. "With the luxury of a triple-A balance sheet and cash, they were able to weather it. We did not have that."
But the question remains whether in the last months of Nortel's life, Mr. Zafirovski, as an American, possessed the passion and commitment to mount an aggressive public-relations campaign based on what the company means to Canada.
He insists he has the necessary appreciation of that role, but he was advised by even his Canadian executives not to go that route.
In addition, he added, Nortel was walking a tightrope in meeting the needs of various stakeholders. While he understood Nortel's status as a Canadian icon, "you have to be careful that you talk to creditors about capital maximization - period." At the same time, there was the need to keep the business running to maintain attractiveness for potential suitors.
Still, Nortel, with 5,000 technology patents to its name, might have presented a much stronger case for a bailout than General Motors Corp., which did obtain massive funding from Canada and the United States.
"How can I disagree with that?" Mr. Zafirovski said. "Obviously, we were pitching it with lots of passion. There were 13 meetings; I was at three of those. All of us had to make our decisions."
Interviewed in a Toronto boardroom decorated with old photos - including a shot of the Northern Electric hockey team of 1902 - he insisted he understood Nortel's central role in the country's history. In the United States, he had worked more than 20 years at General Electric Ltd., whose origins as an industrial powerhouse can be traced to inventor Thomas Edison.
Mr. Zafirovski argues he did have a Canadian option in mind and it meant reaching out to RIM and its co-CEOs, Mr. Balsillie and Mike Lazaridis.
Beginning last year, he had discussions with RIM, pointing out that Nortel's patents for advanced wireless infrastructure would be of great value in complementing RIM's business in BlackBerry handheld devices.
He said there were serious discussions as the two companies came close to a transaction regarding the transfer of patents only. But the deal broke up when, in the court-supervised auction of Nortel assets, Nortel conditionally transferred some of the rights to use advanced LTE (long-term evolution) patents to Nokia Siemens Networks, the stalking-horse bidder for the wireless equipment business.
In the end, Swedish telecom equipment giant Telefon AB LM Ericsson won the auction for the wireless unit, including the right to use, but not own, the LTE patents.
The dashed agreement is what appears to have sparked the current uproar, in which RIM has appealed to Ottawa to review the Nortel breakup, alleging that technology sensitive to national security is being sold off to foreigners.
But when Mr. Balsillie went on a public offensive, claiming RIM was being blocked from buying the entire wireless unit, Mr. Zafirovski said he was perplexed. In all his discussions with RIM, the transfer of the equipment business had never been discussed - only the LTE patents, which could still be up for grabs after the operating businesses are sold.
"I like Jim, I like RIM; I'm puzzled," Mr. Zafirovski said.
He also described his roller-coaster experiences at Nortel since taking over as CEO in 2005. At first, there was progress in cutting costs and shifting research efforts to new technology, and by June, 2008, he was confident that Nortel had turned a corner.
But the underlying problem was that Nortel lacked big enough scale to compete in any of its businesses, Mr. Zafirovski said.
That had led him to try to sell the company and, conversely, to try to buy other companies. In each case, he failed to get needed results.
After the financial crisis roiled the telecom market, he and his managers spent sleepless nights looking at every possible option, he said. The choice was to operate the company and possibly run entirely out of money, or go into bankruptcy protection.
Even after the businesses are sold, Nortel will still own 3,000 patents - just 2,000 are being sold as part of the operating units. Nortel could still sell the remaining patents or it could continue as a patent lessor, collecting royalties from past innovation.
Whatever happens, that business will not include Mike Zafirovski, who says he'll likely leave when he has finished up his current tasks at Nortel. He added that he would not be surprised if he were CEO again somewhere.