Mike Z. Gets Zinged

Globe & Mail columnist Derek De Cloet takes a healthy run at Nortel CEO Mike Zafirovski, suggesting that despite all the work over the past 2+ years, Mike Z. is not doing enough because Nortel’s stock price has performed badly during his time at the corporate tiller.

The column is interesting because while Nortel has been slammed by critics for its accounting troubles and financial results, Mike Z. has pretty much stayed above the fray. This is partly because he looks like a star compared with his predecessors, Frank Dunn and Bill Owens. As well, many people acknowledge Mike Z. had a huge clean-up job to do after taking the helm in late-2005, and that the assignment continues as Nortel looks to reduce costs to remain competitive.

While shareholders may appreciate Mike Z.’s efforts, the reality is Nortel shares have dropped from about $4 to 81 cents when a 10:1 stock consolidation is taken into account. For many critics, that is the bottom line even though Nortel’s bottom line is improving.

In addition to a soft economy and fierce competition, Zafirovski blames the poor stock performance on skepticism among investors. Until Nortel really shows its on the right strategic path, don’t expect skepticism to disappear any time soon.

More: ITbusiness.ca has a look at how Nortel is getting its groove back.

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  • One of the few left

    It's about time someone made Z accountable. We keep hearing about accountability but no one ever questions Z on what he does and the BOD reward him with 21% raises at the same time our stocks keep sinking, we are laying people off, closing buildings, outsourcing, and taking paycuts. When are people going to wake up and and start to wonder why he kept getting passed over at GE. The only person profiting at Nortel is Mike Z.

  • Not Impressed by Ex-GE Leaders

    Well said!! If you are not ex-GE (Hackney, Flanagan), you are not reaping the rewards of Nortel's demise. Take a group of guys that when they were young, did not have enough ambission to go to school for a more advanced degree, (Z = middle school math teacher from a po-dunk school none the less, Hackney = Bachelors in business) and put them in charge of a billion dollar company, then create a bunch of joke lean 6 sigma programs (almost, none of have been successful), and you too can receive millions. The only thing Mike Z has done is lay off people, and move jobs to 3rd world countries using a shell game to make it look like he has turned the company around. Maybe the board should query Nortel's customer loyalty after having dealt with groups in China, Turkey, Russia, and India to see if they will be repeat customers, or they RIP Nortel for CISCO.

  • http://ext.com ex-nt

    Agree with Mop and Pail's points about talk being one thing, and stock value the real thing. I personally don't see any improvements anywhere:

    - stock price down
    - talk about investing in growth, but.. They used to talk about WIMAX and IMS. Turns out they cancelled those programs, so now they talk about enterprise and optical. I see NO good new products on the horizon, just talk.
    - declines in size of their legacy markets (CDMA, switching, optical, enterprise voice), and declines in market share in many markets (GSM, optical, enterprise voice).
    - many layoffs
    - hiring of many weak people like Hackney, Roese and the loss of many good people like Jioanou, Slattery

    I am tired of listening to Mike and his story about “it will take longer than I thought” “we are getting better” etc. etc. The fact is that his plan, which is entirely operational (6 sigma, improving predictability, etc.) is completely wrong since Nortel's issue is its strategy. I see no strategy to allow a very small, poorly performing full-line telecom equipment provider (Nortel) to compete with Huawei, Cisco, Ericsson, Nokia-Siemens, or Alcalent.

  • Another Nortel Watcher

    “Nortel lacks a leadership position in anything.” Bingo. And on this point, I'll reiterate my view that the only area of the company where I see real hope is optical. That market is going to experience some significant growth and Nortel has a shot at grabbing a good chunk of it provided they don't reorganize and put GEniuses into the leadership roles.

    Lowe and Hackney are lost in the woods without a compass.

  • Observer

    One of few left – Z is accountable. He's lost a lot of money buying Nortel shares from $10-$19. His and any CEO's job is to keep the company competitive in the global marketplace. I'm sorry if the job cuts happen in some places compared to others. Its a fact of life. Perhaps you and others would be better off doing something else in North America – the highest cost center in the world.

    Stock price is the now the worst measure of any company's progress because of hedge funds and short selling. I recommend staying away from all equities markets globally as they are controlled by insiders, short sellers and hedge funds.

    I'll be ready to judge Mike and his management team in 2010 – a full 5 years after he has taken the helm. How many CEOs should a company go thru in 10 years ? At some point constant leadership change is counterproductive.

    The bottom line as Mark fails to conclude (even though he mentions the bottom line is improving) is that stock price is no longer and indicator of progress especially during a historial secular bear market.

    We live in a complex world, unless your willing to understand it, its tough to comprehend. I recommend Mike Shedlock's blog as a starting point.

    Fundamentally business involves risk. No one can escape that fact regardless of what they are doing in the private sector.

  • Bill Baker

    “If you want to get to the honey, don't follow the flies” – on old Macedonian proverb. Mr. Z is surrounded with flies, world-class that they might be…

  • Another Nortel Watcher

    Observer – I would support your longer term view if there was something (or someone) I could point to that would help me to understand a Nortel growth strategy. Unfortunately, the landscape is bleak. Carrier is lost at sea (their best accomplishment is not doing too much damage to the LG JV), Enterprise is being led by an outsider with a record of abusing women, and PBT – a bright spot – has just been dumped by BT. Where does that leave us in terms of a business growth strategy? 40G optical? Is that enough? ???

  • One of the few left

    “Perhaps you and others would be better off doing something else in North America “

    Vicky Donato? Is that you?? Sounds just like her canned if you don't like it go get a job somewhere else answer she keeps spewing out on her internal feedback page.
    Ironic part is.. even if everyone was on board and drinking the Z-Ombie koolaide by the gallon, we would still be moving on because he is going to outsource everything that isn't sales or PLM

  • Observer

    Sounds just like her canned if you don't like it go get a job somewhere else answer she keeps spewing out on her internal feedback page.

    Sorry this is not canned. My thoughts are all mine. Its true though. I mean if you don't like what you are doing and where you are doing it, its seriously worth considering doing something new as soon as possible. Life is way too short to sit around wasting time not doing what you want to do.

    Corporations are what they are. The macroeconomy is what it is in North America. If working at Nortel isn't doing it for you perhaps its time to consider picking up new skills and changing to a different industry. The last thing Nortel or any company needs is employees that aren't engaged and interested in their day to day activities. Its just not good for the mental health of the individual or the overall company.

  • Observer

    Where does that leave us in terms of a business growth strategy? 40G optical? Is that enough? ???

    There will always be new opportunities to capitalize on. There is LTE, 40G/100G, Services, Telepresence. Huge opportunities will be created from the energy price spikes in North America. I think more people will have to rely on technology more than ever before if gas and oil prices continue on their upward trajectories.

  • Tongue.In.Cheek

    Observer – what you stated in your last post is true. It is more important to be focused on solving the business issues of their customers rather than having focus on specific technologies.

    In some areas of North America, the Green Initiative is huge and can be solved in many different ways depending on the objectives of each individual customer. Green is not a technology problem, it is a business problem. Not one single technology is going to solve the problem.

  • TrueBlue

    “If you don't like what you are doing and where you are doing it, its seriously worth considering doing something new as soon as possible.”

    There used to be value in identifying problems and trying to change things for the better. Sounds like you'd prefer the status quo.

    “The last thing Nortel or any company needs is employees that aren't engaged and interested in their day to day activities.”

    I'd argue that the last thing a company needs is an incompetent executive leadership team, but that's just me. Usually they are responsible for the disengagement you are writing about. Are you familiar with the concept of FUD? Tends to come from above, not below.

  • Observer

    There used to be value in identifying problems and trying to change things for the better. Sounds like you'd prefer the status quo.

    There is value in it and always will be. But that's not what we're talking about here. I'm referring to being engaged in your day to day activities. Most of the people that post with monikers like “one of 34k left” don't appear to be so. So I don't prefer the status quo. We live in a world now where if you blink, the status quo changes. Oil at $138/barrel today in a blink of an eye. So there's not much value to clinging to the status quo.


    “I'd argue that the last thing a company needs is an incompetent executive leadership team, but that's just me. Usually they are responsible for the disengagement you are writing about.”

    Disengagement is always a lack of personal leadership and personal vision. You have to start with yourself first. Regardless of where you work or what you do, it always starts with the individual. If one is disenchanted or disengaged then one should seriously consider why ? If its because of the day to day environment, then its worth considering a change in your day to day environment.

    FUD is a fact of life. its the same for most of the 6.7B people on this planet. It comes with the territory when one enters this world. Its not something some senior manager or CEO creates.

  • Observer

    I think some folks on this blog could use this…

    The Most Important Thing
    http://americandreamproject.org/blog/2008/06/05…
    Posted on June 5th, 2008 by Will Marre.
    Categories: Lifeology, Relationships, Lifestyle, ADP Diary.

    In the past two weeks I have traveled from Florida to the Rocky Mountains and back to California. I have spoken to nearly every age group, gender, and color of American, literally from 18-80. What I heard was anger. Anger at, well, almost everything that is so obviously broken. But the most pervasive feeling expressed was that we are angry because we are scared. And the most heartfelt question people asked is what can I do to create a personal oasis in a world that seems to be becoming a desert? What can I do to create personal, financial, emotional, mental and spiritual sustainability even if the outer world is convulsing with financial bankruptcy, emotional drama, mental instability, and spiritual confusion? This is the real question for all of us all the time. As one 80-year put it, “Every generation has its great challenge; welcome to yours.” From a perspective of someone who’s lived through pre-antibiotic healthcare, a great depression, a world war, civil rights, riots, and the birth of Rock ‘n Roll, that statement is code for. “Quit whining and take care of yourself.”
    That very night I found myself reading a great new book, The Art of Learning, by Josh Weitzkin who quotes a powerful proverb that fits today’s challenges. Life is a long road of thorns in which we are confronted with three options: 1) we can walk the road barefoot and bloody, 2) we can sit down, weep and wait for someone to pave it, or 3) we can make our own sandals.
    There have always been awful challenges. Plagues, earthquakes, wars, famines, and droughts. Job loss, divorce, death, and depression. Life’s question is “Are we willing to make sandals?” There are many ways to make them. One truism I have discovered in coaching others for three decades is that often a 5% change in our life will result in a 100% change in how we feel. Even though sandals only cover the “souls” of our feet, our entire body and mind rejoice at being relieved of the pain from the thorns of our life. Here is some “leather”—tough and strong ideas that may be of value.

    Be physically strong. Our body is our greatest ally in making us resilient. We need to regularly get eight hours of sleep. We need to eat healthy, non-manufactured food. We should try to never go hungry and never be full. We need to train like athletes, get our heart rates up, lift some weights and walk with our back straight. If we are fit, our thoughts will be creative and our actions more collaborative. That’s the brain science according to Dr. Jim Loehr (The Power of Full Engagement).
    We need to be emotionally centered. We need to elevate our moods by doing positive things we deeply enjoy. Activities of sport, art or learning that capture our full attention and help us grow. We need to do such things at least every other day.
    We need to be fully present in relationships with people we trust. Refuse to take love for granted. Listen with your eyes and soul. Turn off everything else. The T. V., blackberry, and the noise of your inner chatter and really be with those whom you love.
    Seek spiritual growth. Research tells us the happiest people in the world meditate 20 minutes a day. Join them. Help strangers and read what inspires you. Be open-minded. Inclusive. Love with your whole soul.
    Regain your perspective. Take a news fast. No radio, newspapers, T. V., Internet, or magazine news for a week. Pretend you’re on an island in Fiji. Listen to music that soothes you.
    Be an expert. If we are going to give our gift, we simply must be great at something we value. Educators say it takes ten years to become a true expert. And real experts are constantly learning because they love what they are doing. It’s not work. And when you fuse your personality with your expert knowledge or skill, you’ll be one of a kind. Your expertise will be work that you love doing.
    Travel light. Get out of debt. Remember, there is nothing you can buy that is worth more than peace of mind. Nothing.
    Commute and drive less. Bargain for one or two days of telecommuting. Combine trips. Nearly all of us can drive 25% less, which will increase our quality of life.
    Be strong and be flexible. There are very happy people living under almost all circumstances. Change what you can and see the advantage in what you cannot.
    Don’t take the external parts of life too seriously. The purpose of this amusement park called life is to love deeply, learn without stopping and develop inner character that brings honor to your children.
    If you’ve made some changes that have improved your quality of life, tell us about them. We need to share our “best practices” of life.
    Will Marre
    Founder, American Dream Project

  • Mr Real

    because the hedge funds are selling?
    really?
    is that the reason for these “low” stock prices?
    really?
    is that just short selling or the notorious “i'm mister conspiracy theorist” NAKED short selling?
    Any other conspiracy theories you have there that explain the “low” stock prices?
    Was it also responsible for the “low” prices we got a few years ago? How about before then?

    Can I give a free piece of advice without it being taken as condescending?
    Look at some raw data without emotion and see if this short selling story adds up. If it doesn't, maybe it's time to look elsewhere for explanations?
    really!

  • Observer

    The reason the stock price is low is because of a slowing global economy, competitive pressure and lack of a true growth story. IMHO, the market is being fed more by economic concerns and has been since January of 2007. Right now all equities are headed on a downward trajectory because of a prolonged recession. I don't expect any stocks to hit bottom until 2009 at the earliest. It will be a repeat of 2001 and 2002 all over again but with higher inflation and a much poorer economy. As always its never any one reason equities go down across the board, its because of everything.

  • puddintane

    So if I venture over to, say, Motley Caps I should see all stocks consistantly tanking.

    While I agree that theres a indeed a time and season, ebb and flow, yin and yang, etc .the green we see on Nortel is not budding spring grass, fresh paint, or rmoney; it sure looks and smells a lot like gangrene.

    People can recover from that just as they can recover from cancers, amputations, adapt to handicaps, etc. but to argue that there are no Special Olympics” only Olympics …. no “losers” just “competitors”… cmon….

  • puddintane

    Emotionally speaking Nortel 10 years ago was once the Super Target of telecommunications. A bit more pricey than, say, Walmart, but thats because it was cleaner, more colorful, had much more personality, and offered items you wanted, not just needed. The checkout lines were less crowded because of this but, hey, it was worth shopping there for that reason, too. You got prompt attention for your money.

    It got even better when a few bad apples in management began helping themselves to all the profits, literally dumping any crap product that didn't add to the stack immediately and directly into the garbage, helping themselves to the customer samples, and going on long vacations. Their underlings, and even customers, soon followed suit, and when the place was sacked the suits booked, the staff nursed a hangover, and the clientele began to look elsewhere for love. Party over.

    No surprise herre: Subsequent managers' solutions to cleaning cleaning house was to throw yet more stuff away, lay people off, and develop copious stats to show where things may have gone wrong, but were improving mightily. Then go on a nice vacation.

    Today Nortel more closely resembles a Sam's Club, where you get some what you need only. Right off the skid. Maybe once a month. If a cheap product still doesn't sell, discontinue it. If some schmoe employee takes more than the alotted 5 minutes to dump it in the trash, ya dump with him, too. Stats say that lights in the break rooms cost money. Turn them off. You'd think working in seas of empty cubicles would send them the message that the party is over, dammit. Maybe its best to hire college kids; they don't know from cubicles. Screw it. Lets send the whole shebang off to cheaper countries. Next up: Build synergies by outsourcing the parking lot to a neighboring business, thus staying true to our slogans –

    “Simplicity beats complexity any old day”
    “Our switches will save you money, like turning off the lights your break rooms will too”
    “Oh and wer'e still your friendly neighborhood Super Target.”

  • puddintane

    Emotionally speaking Nortel 10 years ago was once the Super Target of telecommunications. A bit more pricey than, say, Walmart, but thats because it was cleaner, more colorful, had much more personality, and offered items you wanted, not just needed. The checkout lines were less crowded because of this but, hey, it was worth shopping there for that reason, too. You got prompt attention for your money.

    It got even better when a few bad apples in management began helping themselves to all the profits, literally dumping any crap product that didn't add to the stack immediately and directly into the garbage, helping themselves to the customer samples, and going on long vacations. Their underlings, and even customers, soon followed suit, and when the place was sacked the suits booked, the staff nursed a hangover, and the clientele began to look elsewhere for love. Party over.

    No surprise herre: Subsequent managers' solutions to cleaning cleaning house was to throw yet more stuff away, lay people off, and develop copious stats to show where things may have gone wrong, but were improving mightily. Then go on a nice vacation.

    Today Nortel more closely resembles a Sam's Club, where you get some what you need only. Right off the skid. Maybe once a month. If a cheap product still doesn't sell, discontinue it. If some schmoe employee takes more than the alotted 5 minutes to dump it in the trash, ya dump with him, too. Stats say that lights in the break rooms cost money. Turn them off. You'd think working in seas of empty cubicles would send them the message that the party is over, dammit. Maybe its best to hire college kids; they don't know from cubicles. Screw it. Lets send the whole shebang off to cheaper countries. Next up: Build synergies by outsourcing the parking lot to a neighboring business, thus staying true to our slogans –

    “Simplicity beats complexity any old day”
    “Our switches will save you money, like turning off the lights your break rooms will too”
    “Oh and wer'e still your friendly neighborhood Super Target.”

  • http://www.kleendrybh.com Tile Cleaning Boca Raton

    Another day another awesomely written article, thank.

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