Mike Z.’s Nortel Legacy: Fail

By Mark Evans | Published: June 22, 2009

With Nortel deciding the only course of action is a fire-sale of all assets, Mike Zafirovski’s reign as CEO is about to conclude. Without being too harsh, it’s fair to say Mike Z.’s initial – and perhaps last – stab as a CEO was a colossal failure.

Sure, he dealt with some pesky accounting issues and reduced costs by laying off thousands of employees, outsourcing jobs to low-cost places, and selling a few assets. But the bold moves that Nortel needed to survive and thrive in a volatile and competitive marketplace never materialized.

A perfect example is how Nortel’s lack of M&A activity, especially given Mike Z. hired George Riedl, an M&A wizard, away from Juniper. When your biggest acquisition is Tasman Networks for $99-million, it’s obvious you’re not in the game.

In hindsight, Nortel had nothing to lose by playing it safe and conservative. With cash in the bank and a stock price that, at one point, rebounded to nearly $20, Mike Z. had lots of options to do something dramatic and game-changing. Instead, he stuck to a game-plan he knew from General Electric.

To solely blame MIke Z. would be unfair. If people are looking for scapegoats, Nortel’s board is the perfect candidate. Over the past decade, the board has been a huge disaster.

Here are some of the lowlights:

- It let ex-CEO John Roth go a multi-billion dollar spending spree, many of which were mistakes that Nortel wrote off or sold

- Dismissing Gary Daichendt and Gary Kunis’ aggressive corporate makeover

- The hiring Frank Roth and Bill Owens as CEO, who were unsuited for the job.

- Letting Mike Z. do nothing as Rome (aka Nortel) burned.

Truth be told, Nortel could have been saved if the right moves had been made. When Mike Z. took over, it was a $10-billion that needed strategic focus and a new, bold direction. Mike Z. was handed a huge opportunity to make his mark.

Unfortunately, he dropped the ball and, as a result, Canada’s flagship high-tech company is going to disappear.

For more, check out James Bagnall’s story in the Ottawa Citizen. As well, Om Malik has some thoughts on Nortel’s demise.

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vvvv

There are 101 reasons why Nortel failed. Many of them pre-date Z, but not all of them.

So a person can this “it was this” or “it was that” and be correct; so can the next person who points out a different mistake. None of those mistakes individually were a killer, but collectively they were fatal.

It's just like many airplane accidents; it often takes a series of things going wrong in exactly a certain way to produce the accident.
less

Ah ,that good old secular global bear. Named Mikey.
Milan_Bekich

Poor, poor (and I mean literally do mean poor) reepr.

Watched me and all the other peddlers make literally millions while he did all the heavy lifting. We made the outlandish promises and left nerds like reepr behind to clean up the mess.

Life was good, life still is good. I'm living life large reepr, so how are you doing bit twiddler ?

Milan
Nortel watcher

Pls tell us you were also an ex-pat a portion of your Nortel yrs getting a nifty housing allowance, car, etc. + $200K in annual comp…if you didn't, then look at what you missed out on…
Nortel watcher

Once the shares are delisted from the TSE, I wonder how long before http://www.nortel.com gets taken down..one more sad day for all of us..perhaps the saddest
The psychiatrist

yes unfortunately the end of Nortel hurt many including employees and their families,customers,shareholders,creditors and even Canadian heritage.

To add to this Mike Zafirovski's last memories with Nortel will be that he was “The CEO” associated with guiding the company into liquidation and last but defintely not least was that his last public words describing why bonuses were awarded while severance was denied was only because he was forced to do so by way of being summoned by the Canadian Government after initially refusing to do so.
yes4aapl

The psychiatrist
come to the workshop, the old mess board..
here at AAN it's more official and less of discussing things
Start your new life there
http://messages.yahoo.com/Recreation_%26_Sports…
There is life after NT! my opinion y4
yes4aapl

http://messages.yahoo.com/Recreation_%26_Sports…
yes4aapl

or this
http://tinyurl.com/nxzymq
CS1000

You manifest the typical NoTell arrogance, ego and foolish pride, back-stabbing, disrespectful, wake up, dude! your dream is over
Teleguy

Frank Roth? I think this blog is as tired as Nortel is. You have my sympathy, trying to keep up with all the twists and turns in the Nortel nightmare is a full-time job. But, maybe, it's time to close it down, now that Nortel is no more?
bunkster

You sound exactly like the kind of f***ing a**hole that I will be so glad to be rid of when this whole thing is over. Go buy a life, goof.
Milan_Bekich

Dude!

I am living the dream! I collected commissions on gear that is still sitting unused in warehouses. Teligent was my account. NT financing at 150%. The more they bought the more money they got.

Thank you Wayne Fathergill !

Milan
Milan_Bekich

I did do a year in Sydney in 1999. No sales but lots of easy women and great beaches.

Sun tanned Milan
bunkster

That was meant for Milan – god's gift to telecom.
yes4aapl

I did do a year in Sydney in 1999. No sales but lots of easy women and great beaches.

Sun tanned Milan
—
re

I concur
easy women and great bitches
Sydney! kangaroo!
Milan_Bekich

I did buy a life, with the easy money I made on the NT gravy train.

Selling NT in the 90's was easier that selling ROLM in the 80's. No competition, 150% financing and the bean counters were on the take so zero debookings.

Is Canada a great country or what ?

Milan
Milan_Bekich

My man! Shrimps on the barbie!

Bimbos on the beach !

Milan
yes4aapl

express yourself man
Did you like kangaroos?
tiredofitall

I am entitled to fair market wage for my work. My NT salary is on par with every other software engineer with similar experience in Canada. I have checked more than once over the years.

If you are suggesting that NT employees have a sense of being entitled to the same wage as others doing equivalent jobs for other companies, then you are correct. Do you feel you deserve less than your peers?
nerp

I was on the GIS with R. Lowe today. Some points I took away may be useful to the readers:

- The 2,500 or so number of CDMA/LTE employees moving to NSN (if they win the stalking horse) represents about 80% of the current CDMA/LTE access employee base today. (this means there is around 3,100 today).

- The stalking horse runs until July 24th, and the winner is announced about a week later.

- if NSN wins the auction, the 2,500 could be an NSN employee by August 1st.

- NSN cannot absorb all 2,500 into payroll at once, so it is likely Nortel will continue to pay salaries (with NSN monies I assume).

- don't know where the 2,500 will be initially based (real estate likely to drag on, so Nortel real estate would likely rent out space to NSN until that gets sorted out.)

- Years of service will be bridged. ex, if you have 20 years @ Nortel, you start day 1 @ NSN with 20 years of NSN service.

- salaries will be about the same (“won't get screwed” according to Bruce Gustavson) as well as benefits; essentially going to be on par with current NSN employees.

- US Nortel employees who have accrued vacation will get cashed out whatever is “in the bank” when moved to NSN.

So what about the delta between 3,100 and 2,500? Most of North America CDMA/LTE access employees are covered, but account/operations outside of NA are not of primary interest to NSN. There are still reductions going on this month and into July. R.Lowe was vague about who would move, and who was not covered but IMO if you are not directly involved with CDMA North America, you'll be up the creek without a paddle/package.

Worth noting that NSN will apparently be making offers to the 2,500, of course that means it could be turned down, but I don't think anyone will turn down offer of employment with a complany with stronger base.

My 0.02 – which is worth more than NT stock price!
misterideal

wasn't it the prime minister who told the whole country it's a good time to invest in the market and so I did in Nortel .Common shares in any company are ways for the insiders to make free money from ordinary people.Scam and nothing but a scam. The stock market has made millionairs who never invented anything or established a business from scratch.
GoProto

From what i remember, YOU , or the “package” you toted was the Shrimp on the Beach, ur, i mean Barbie! Yours truly. a blond Bimbo ..
GoProto

Milan- From what i recall- YOU were the “Shrimp” on the Beach, umm i mean Barbie.. Catch my drift? Yeah, Milan..my ass..never saw you from the runway.. Yours Truly, one extra-ordinary Blond .
dljvjbsl

What will be teh title of the last post on this blog.

My suggestion would be:

This is the end
Beautiful friend
This is the end
My only friend, the end

Of our elaborate plans, the end
Of everything that stands, the end
No safety or surprise, the end
I'll never look into your eyes…again

From tehe Doors and Appocalypse Now
dljvjbsl

Why would anybody buy shares in a company that has been dying for such a long time. Even BCE hedged their Nortel shares. My opinion is that business historians will find that the rot set in in th early 80s after the initial success of DMS. It has been all downhill since then

Another possibility, but really just one more cycle in the death spiral, was the death of BNR.
nortelex

Thats good news. Sound like all the CDMA people in NA are safe then….good for them.
Soon2BExNortel

Anyone know about NSN's benefit package (number of vacation days, 401(k) matching, etc.)?
nortel_cn

This Monday morning, I'm sure ZMans recieved congratualation calls from companies :

Alcatel-Luncent
Ericsson
Huawei
NSN
ZTE
broadbandbill

About After Nortel…–bb
broadbandbill

Better than Serbia?–bb
nortelex

I have a question, CDMA is a dying business with Nortel. How would Nokia make it growing/profitable again? Would the big customers start buying more because it's Nokia now?

I am trying to be an ass, just want to hear opinions.
reasonreality

A few comments:
1) CDMA is on the decline, but it is not dead. It still has a number of years left in it as CDMA is defined as IS-95, 1xRTT, EV-DO, etc…. it is a cacth all phrase for the evolution of the technology right up to 4G. Vz and others will be adding capacity and some footprint over the next few years, so this along with fsoftware upgrades and maintenance plans should ensure decent revenue, at good margin, for a few years to come

2) NSN does not sell anything of note to VzW, Sprint, US Cellular, Leap, etc… today. With the acquisition, they will now be a major supplier to the companies I just listed. In addition to going from number 6 to number 2 in NA market share, they now have the opportunity to sell other pieces of their portfolio to these carriers.

3) In terms of $$$, I would expect that they would b/e on the investment in pure $$$ in 2-3 years based n the margins alone. That fact, plus the startegic footprint that they will acquire will more than cover the very small purchase price of $650M.
reasonreality

ask Kevin Marcellus and/or quit worrying about these details. You can maybe ask if they provide free coffee in the morning and have showers int he office.
dljvjbsl

If I was in a position in which a white knight company was going to save my livelihood, my first questions to it would not be about vacations and statutory holidays.
nortel_cn

====================================
- The stalking horse runs until July 24th, and the winner is announced about a week later.
====================================

Are you sure this is correct? It seems the horse won't be stopped untill Sep. 7th.
broadbandbill

Re-posted:

A short summary of what happened to Nortel:

Great and dedicated employees, plus
No vision, plus
No strategy, plus
Extreme executive arrogance, plus
Money-grabbing management, plus
80’s style superficial lingo and PR, plus
ZZZZero Leadership, equals:
Disaster!!!!!
Nortel will be a business schools’ case study of what not to do.

With deep sadness…–bb
less

In all seriousness, I agree.
charlesolga

Hello: Is it possible for Nortel to transfer all their people to the other businesses that may buy Nortel? Would that be a condition of purchase of Nortel businesses? It would save a lot of misery wouldn't It?
charlesolga

Would it be possible for Nortel to transfer all their people with the sale of Nortel businesses? It would certainly prevent a lot of misery wouldn't it?
Milan_Bekich

“one extra-ordinary Blond “
…courtesy of bleach, botox and silicone.

MB
misterideal

you'r right!! why would anybody buy shares in a company that looks to be dying.”Never say Never “a good example would be Apple… near death and out of the picture for years come out with new innovated tech such as the ipod and their back in favor with wall st.Technology can change life as we know it overnight and that is why you never give up on tech companies as huge as Nortel . What could have BEEN.!!!!Just like the AVRO ARROW.
Nortelinio

>>At least 2,500 employees would have the opportunity to continue with Nokia Siemens Networks.

So – what is hapenning to the remaining 20,000 Nortel employes? There is probably not that many employess in the remaining business units – Enterprise, Optical, and Wireline

On a side note, it is interesting how all media reports referring to 30,000 employees. I left in early June as of last count, there were just around 23,500 employes in their HR system
Milan_Bekich

What am I bid for Enterprise? Do I hear an opening bid?

Milan

Nortel Networks will soon announce the sale of its big enterprise division as it moves closer to a decision to break itself apart completely.

Nortel said it would sell its CDMA and LTE wireless businesses to Nokia Siemens Networks for $650 million. The enterprise unit, which makes networks and gear for large corporate clients, is seen as a next logical candidate,.

After the wireless division, it is Nortel's biggest business unit. It had first-quarter revenue of $395 million, down 41 percent from a year earlier, Nortel reported last month.

Nortel said on Friday it is making progress in selling its other businesses, but added it will “assess other restructuring alternatives” if sales don't materialize.
yes4aapl

I don't agree for such accusations.

sorry
BB you crossed the line in that.
I love u anyway!
yes4aapl

Being in that company for more than 30 years before they let me go last March. I do believe that the downfall started when John Roth bought the famous Bay Network
—–
re
I have no rational arguments to defend John Roth..
It's my opinion
He was a good guy! my opinion
but hey
what about crooks like Jean Monty?
Ex Nortel CEo who stabbed Nortel in the back!?
GoProto

Nope,
so sorry-
not a single dram of any of the above.
Casual_Observer

HA ! This blog did not affect Nortel one iota. Its tough for an economy to function once global debt to GDP of the country that is responsible for 25% of global consumption is close to 100%. As I said in my post above, Nortel was doomed long before Mike Z came on board. The company could have been broken up sooner for better value but Mike Z decided to give shareholders the worst possible value because of his lack of understanding of market dynamics, economics and math (what he majored in). The global economy is still in a long process of deleveraging from all kinds of shenanigans the last 15 years that were primarily based on debt (via central bank leverage) and not savings. Instead of reading AAN now that Nortel is really done, perhaps folks can focus on macroeconomic issues of real impact. Nortel has been yesterday's news for over 8 years. That should give you a hint as to how much longer things can go on before their demise.
broadbandbill

No accusations, just historical facts – period! Love u2..–bb
broadbandbill

No, because if that were the case than there would be no buyers. No one will buy an 'overloaded' biz unit; no one is that dumb..–bb

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