Nortel Shuffles Executives, Cuts Just 1,300 Jobs

By Mark Evans | Published: November 10, 2008

After speculation running rampant that Nortel was going to slash between 3,000 to 10,000 positions, it will be interesting to see how investors and analysts react to what can only be seen as a modest plan to eliminate 1,300 workers, or 4% of the workforce.

With Nortel deciding to cut few employees than expected, the HR spotlight will be focused on the departures of four senior executives: chief marketing officer Laurent Flaherty, chief technology officer John Roese, global services president Dietmar Wendt, and executive v.p. global sales, Bill Nelson. In particular, the decision to get rid of Roese will be scrutinized given he came to Nortel with little carrier experience.

This can only be seen as a major disappointment for CEO Mike Zafirovski, who recruited the four executives as part of his extensive management overhaul when he took over from ex-CEO Bill Owens.

The 1,300 job cuts are part of a plan to slash costs by $400-million in 2009, and will include the elimination or consolidation of executive and management positions; salary and hiring freezes, and “other broad” actions to cut costs and discretionary spending.

“We are acting quickly to become a simpler and leaner company, with the greater flexibility and responsiveness required to manage our business in a rapidly changing marketplace.” said Zafirovski said in a statement.

As far as the sale of the metro Ethernet network unit, nothing was announced so you can read into that what you will.

Nortel also unveiled a new operating structure that will go into place on Jan. 1, 2009:

- An enterprise business headed by Joel Hackney, which will include voice, data and unified communications technology, advanced software and the associated services and solutions.

- Two business units – carriers networks and metro Ethernet networks – led by Richard Lowe and Phillippe Morin, respectively. Both units will be supported by a global sales organization led by Darryl Edwards.

Here’s the Nortel press release, which includes the third-quarter results. The financial highlights include a cash balance of $2.3-billion and the decision to suspend dividend payments on its series 5 and 7 preferred shares.

Technorati Tags: mike zafirovski, Nortel

This entry was posted in Executive Suite, Financials. Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.

Smoke&Mirrors

...reduce the workforce by approximately 1,300 positions net...

That word NET scares me a bit.

Like Skeptic I tend to think that means more like 3,000 job cuts in the US and EMEA and 1,700 new jobs in China, Mexico etc?

An Old Hand

That word NET scares me a bit.

Yes. That jumped right out for me as well. They make it pretty pointed, don't they.

Lonely Ops Guy

I did not hear the call but this net thing is weird, given that all hires are frozen. So doing the math 1300 cuts minus 0 hiring = 1300 net cuts. Is that all? With all the consolidation and duplication (or quadruplication in some cases) is this all NT will cut? Something is not jiving......

seeker

They are calling for 1300 net reduction in addition of another 1200 net reduction still not done. This amounts to 2500 net reduction if I read it corretly. Now I know that in the past net reduction would mean for exemple: we will hire 1000 new employees in Mexico and cut 3000 in North America(net reduction =2000).

rating

moving from pauper to beggar status.

indisbelief

Morin stays on??

1300 cuts is a joke. They must not be able to afford more layoffs now. Cash is king so die slowly.

protosphere

One analyst called the cuts too "shallow" expecting at least 3,000, more than twice the 1,300 announced.
He saw this as bad news, not cut enough.

I attribute lower cuts it to ill affording severances. They must balancing declining cash to survive another day tooth and nail.

Skeptic

I’m always skeptical of statements like:

“We will be reducing our global workforce by approximately 1,300 positions.”

This statement doesn’t mean the job losses won’t be higher. It is very generic and still leaves the window open for the company to continue to move jobs to “low cost centers” but not eliminate “positions”. My personal bet is that the “strict hiring freeze” will apply to locations in the US, Canada, and Europe, while exempting lower cost locations like China, Mexico and Turkey.

While we’re cutting costs, let’s get rid of the corporate jet, and amend the corporate travel policy and remove “business class” travel.

Lonely Ops Guy

I second that.

seeker

OK they say they will slash 1300 more jobs but only 25 % in 2008 and the rest in 2009 so they give themselves a lot of latitude !! Also you need to consider that they never did all the lay offs they announced a while a go(1200 is remaining if I read correctly the Nortel press release). So total to go is 2500. Nortel seems to have a lot of problem to do what they say there gone do when it comes to lay offs and you know why ? Well most of the employees left out there are overloaded with work and additional tasks to do consequence off the restructuring done over the past 8 years. So where will you cut and to whom you will give the extra work ? That's the knot of the problem and probably a big headache for the deciders !! You cant do these massive lay offs and try to keep all the different business going like nothing had happened !

layoffs

overloaded with work. how can you explain people leaving at 3pm and not even completing 8 hours a day.

Still_waiting

Which group ?, What department ? I carry a pager every 3 weeks and work 80 to 110 hrs during that week. If you can kindly point me to the department, that people are leaving at 3pm, maybe I can transfer to that group and get relieve until my time is up. To get global coverage some people do come in at 4:40 am and leave some days at 3:30 pm.

exnt2

MEN

NortelDesigner

maybe in your area - there's deadwood everywhere in most companies. However, I know people in many areas of the company, and I work in one, and everyone in other lines of business and in mine are still working work and logging a heck of a lot more than 8 hours a day.. Flippant comments like yours are so negative, especially on a sea of positivity that the rest of the comments here are ;-)

exnt2

maybe but if things are sooooo productive then you should be churning out products like crazy. I have heard working from home is quite rampant, with no accountability. 'some' people definitely are abusing the system not completing their hours, taking days off sick or work from home and regularly mind you with no notice period.

ask your manager if anybody is found guilty whether they should be terminated with 2 weeks like in other companies. you will get your complacent answer. others have because they complained.

broadbandbill

A note to Bo Gowen,

Re: CMO

Never argue with me again; I know my $#!+ inside and out!!!!!! --bb

Nortel watcher

where's Bo?

Tongue.In.Cheek

Industry consolidation, I think this will become an important topic for Nortel and the industry as a whole over the next 12 months. The pending structure of Nortel into Line of Business units of Carrier, MEN and Enterprise with Services integrated into each creates a structure that would allow this to happen in an easier way.

It would be interesting to better understand the LTE market and which companies having technology and market leadership. For instance, Ericsson does not have a CDMA portfolio but they do have a strong GSM and UMTS portfolio. Not sure on their LTE capabilities but there may be some opportunity there for them to capitalize on the CDMA - LTE transition with MEN leveraged to provide backhaul solutions.

In Enterprise, perhaps Mark's comments from a couple of months back regarding IBM hold some water. Unified Communications is a growth market that is likely to be led by Microsoft, Cisco and IBM. At the moment, IBM is the weakest of these 3 given their lack of voice capabilities in their Notes/Sametime solution.

Who knows what will happen next as there are many outstanding questions on how Nortel will look in 2009.

Another Nortel Watcher

A few comments on today's announcement:

Positive: John Roese gone. Did not know Nortel's business well, was a weak leader and hirer of people, did not have the right rolodex.

Positive: Global Services gone. I think this could have been a lucrative business for Nortel, but they couldn't execute. Given the failure to execute, better to amputate than to struggle.

Positive: Leader of Global Sales gone. Bill who?

Positive: Compartmentalized businesses that will make them easier to break apart and sell individually. Also, if you have leaders who can't play well with others by nature of their personalities, better to not bother trying to force it. It will just create tension. Replace them or recognize their shortcomings and operate accordingly.

Negative: Compartmentalized businesses in deeper silos than ever before. Nortel has completely missed the opportunity to leverage it's individual businesses across the greater whole (for years) despite the ripe opportunity now and ahead to do so in the customer base. Nortel is giving up differentiation relative to Cisco and Avaya.

Negative: CMO gone. Nortel's reputation is in the toilet. Marketing has a huge role in the work ahead to turn this around. Who's going to lead this critical function?

Negative: Richard Lowe continues to run Carrier. Ongoing failure to grow the business, does not understand the market he plays in or how it's changing, is not recognized in the industry as a relevant player, does not have the respect of his organization.

Overall: Neutral. Some positives and negatives, but MZ remains in charge with no credible growth plan and a weak cabinet. Status quo for the moment until we see the next changes.

exnt

ANW - agree with all your points. I would add a few points:

Negative: Dennis Carey still around. What value does he add other than being Mike's buddy?
Negative: Cost structure still a mystery. Where does all the SG&A money go? Surely not on people, there are not enough left to spend that much. Is it real estate, payments to consultants??

Another Nortel Watcher

Good point on Dennis Carey. That seems like an unnecessary layer. MZ is running a shrinking company now. Time to flatten the org a little more. No reason why the ops units can't report directly. MZ should either eliminate Dennis Carey's position, OR eliminate the layer directly under Carey and force him into more of a hands-on role (if he's capable). The former is obviously a lot easier and likelier a much better choice.

exnt

My questions that I could not ask on the conf call:

- Is the plane that Mikey Z uses for business and personal travel going to be sold?
- is Mikey going to stop commuting from Chicago to Toronto where he supposedly is based?
- Are the outgoing execs getting the usual 2 years of payoff?
- Is anyone going to take responsibility for the debacle at Nortel or are we all going to buy into the story that it is the economy?
- Is Darryl Edwards a good choice for head of carrier sales given his past performance?
- Any bonuses this year?

Underwhelmed

So what! Very disappointing news.
They are going back to embedding R&D into the LoBs (something they just finished restructuring under Roese) resulting in nothing more than additional upheaval for employees. The loss of execs like Roese and Wendt is extremely disappointing. I won't speculate on whether they initiated the decision or were asked to leave but the remaining leadership does not signal the kind of change that is required to improved results moving forward.

How much longer can they continue to operate in all the diverse solution areas that they are trying to compete in - especially as they accelerate R&D cuts...

HangingInThere

It's good to see Hackney further rewarded. Have to admire him, being able to get away with what he did with no consequences!

NewBlue

He probably threatened to slap Z around in public if he was let go.

exnt2

only 1300 ... very small number considering men not sold.

mostly engineers will go. management knows how to stick around.

bye bye John Roese. thank god. sad to see Lauren CMO go. she was good.

The Left Behind

Amazing that the CSO stays given the fact that his contribution has been zero in shaping the strategy of the company.

The Psychiatrist

Maybe it's because George's wife is giving Mike's son guitar lessons on the weekends?

exnt

Is this for real?

notafan

Mark,

allow me to add that the 1300 layoffs are in addition to the 1200 remaining from the previous restructuring plans, so that makes 2500 layoffs planned from today.

also, they expect to save $190m annually from the 1300 layoffs, which makes avg of $146k of savings per person per year.

Nortel watcher

notafan,
Not sure why you bring up the 1200 from the past...aren't those people gone already and off the payroll? If not, then how long will it be before the new layoffs announced today translate into empty desks?

notafan

1200 are still to be "eliminated", meaning they're people still on payroll.
not sure when the 1200 will be laid off, but what they did announce was that 25% of the 1300 will be cut in 2008, and rest in 2009.

NewAge

It is cold in Canada this time of year and for some people it will get colder...
Still no update on the sale of MEN..

What will happen if NT can not sale MEN? Bankruptcy?

less

"...broad actions that will reduce costs and discretionary spend. In times of rapid change..."

I take this to mean that soon every Post-It note, coffee cup and floppy disk - sorry, DVD-RW is the norm over at the cutting edge of technology, eh - will fist need to be justified, evualated, entered in a database and presented to Johnny Sigma. Or else.

How bureaucracy will allow for "rapid change" in is ever open to debate. Nortel will be falling from one extreme into another.

The Left Behind

you forgot on bathroom use.

Only 2 uses allowed per day to conserve water and cleaning services..

less

Nortel is green, which means they'll vaccum up and reuse all that natural gas lingering in the darkened crappers without any valid business case. Its clean, free energy.

Also, blow drying ones butt and brushing the resulting flakes into the designated compost container could be used to fertilize X sq.ft. of NT campus grass (Johnny Sigma already has a handy "X butts per square foot" cubicle formula).

Tongue.In.Cheek

Now that was a brilliant comment! Good grief.

more

Employees have been mandated to cut all non-essential travel. All essential travel must be conducted through Greyhound, Amtrak, or hitchhiking.

Tongue.In.Cheek

Why don't you show us where Nortel actually said "All essential travel must be conducted through Greyhound, Amtrak, or hitchhiking.".

Oh that's right, you can't. It's just another one of your typical lies, which is common place for this blog.

less

"Why don't you show us where Nortel actually said 'All essential travel must be conducted through Greyhound, Amtrak, or hitchhiking.'

Oh that's right, you can't. It's just another one of your typical lies, which is common place for this blog."

Laypersons Greyhound, Amtrak, and hitchhike, which reveals green iniative. Nortel is green. Thats no lie.

resident.of.cubeland

this is my worst case scenario for this announcement - relatively minor number of job cuts, no strategic direction, huge quarterly loss, no update on the sale of MEN. at least some executives are out - maybe more will follow. this just proves to me that the management team is not serious about turning this company around.

it seems to me to be something akin to repeatedly papercutting yourself to try to cure your cancer.

stillontheisland

Totally agree. From the inside this is the worst case scenario. Ahead are more quarters of denial, avoidance, and lack of effective leadership, enabling those who are privileged to continue lining their pockets.
Restructuring can be a force for real change and an opportunity for real vision to drive positive changes.
This is not restructuring!

Tongue.In.Cheek

Mark, you may wish to double check the press release. The Marketwire release states that Darryl Edwards will lead a Global Sales Organization for Carrier and MEN, not a Services Organization.

Will be interesting to read more and listen to the conference call for more details.

Clint

Same old NT.
Delaying the inevitable.
Dying a slow death.
I wonder how many of those 1300 cuts are employees instead of middle management or SG@A?
Won't take drastic measures in order to protect and ensure big severance packages for the klingons.
Keep people and projects that are not generating any revenue or have no hope to do so. No plans to sell off CDMA and no word on the MEN sale.
In other words I am sure employees there today will feel worse than they did last week. Mike thinks he is directing a new zombie flick by the looks of it.
With Roese gone does that mean everyone in the CTO is gone?
Salary freeze, Hiring Freeze.
Setting their ducks up in a row for something?
NT change their mind overnight. Next quarter they can simply come out with another new number for layoffs. Which is what they'll likely do.
Rather than be pro-active and announce a large number it seems they are not able to do that because they are not confident in their ability to pay out severances. I am sure that is why the number is only 1,300?
What's next, Chapter 11?

BigD

>>Setting their ducks up in a row for something?<<

More like lining up the ducks into groups so each group can function independently with minimal help from other non-essential corporate functions. Sounds like setting up for the sale of the duck pond parcel by parcel.. Also explains why the number of cuts is less than wild guesses from everyone. Why cut them now when you can let the acquirer decide?

Bo Gowan

Clint - to your question: With Roese gone does that mean everyone in the CTO is gone?

No, R&D and others in the CTO org will be moved into the business units that are most associated with their work.

Desk Jockey

Wow, did not expect this. Somewhat ironic that two of the departing executives (Flaherty and Roese) had such positive articles published about them just last week. What will come out of the Ministry of Truth to explain the departures? Not that anyone needs an explanation. And Nelson, with the company less than a year - I wonder what his severance package will be like.

One only wonders how long it'll be before another round of layoffs is announced.