Nortel’s CEO still confident in his plan to rebuild the company

At two conferences over two days, Nortel Networks Corp.’s president and CEO Mike Zafirovski reiterated his vision for rebuilding the once-great telecommunications equipment maker by being relevant in both the carrier and enterprise space and staying the course he outlined earlier this year (NL, April 12/06). "For better or for worse, I’ll be very consistent from day to day, week to week, month to month, year to year, and hopefully decade to decade," said Zafirovski during a May 22 webcast from JP Morgan’s 34th Annual Technology Conference. "In the last six months on the job I’ve had a chance to visit with hundreds of our customers, visit all our key locations, shareholders and suppliers, I do believe that we have a good perspective on the opportunities and challenges facing us," he added the next day as the closing keynote speaker at the Lehman Brothers Inc.’s Worldwide Wireless and Wireline Conference. At the JP Morgan conference, Zafirovski noted that while he is confident in what he calls Nortel’s "say-do ratio" – accomplishing what it says it will do – he knows numbers speak louder than words and the company’s stock price will continue to be a litmus test of its progress. One of those numbers will be the $1.5-billion increase in operating margin by 2008 the company laid out when it launched its three-to-five year process to recreate itself. Zafirovski thinks the company has everything in place to achieve its goal, but its main challenge will be making the decisions going forward to stay relevant in the carrier and enterprise segment. "I do believe the doors are wide open for us, both on the carrier and on the enterprise side, so I would not take the view that we are somewhat helpless and cannot control our own destiny," he said. Comparing his tenure at Nortel thus far to his early days at then-struggling Motorola, Zafirovski said the situation is similar in the respect that like Motorola Nortel is a tarnished icon, but one that can be rebuilt. "The company had significant assets, significant heritage, was able to recruit the right level of people, then as we put some of the processes in place…the momentum comes ," he said. Many of these processes were dropped over the past six years under the impression that launching new products required a different approach if the company you wanted to keep up with the fast moving economy. However, Nortel is now paying for that lapse with extra costs to service its equipment. Zafirovski wants to get back to when Nortel had great processes to introduce new products. "There’s much more of an operational discipline that needs to be brought in," he said. Zafirovski continued to discuss the early fruits of Nortel’s operational refinements at the Lehman Brothers conference, noting that the direct materials team has already made strides. The company’s total direct materials costs for 2005 were $3 billion, but that number is down 25% on the first $700 million spent this year, taking it towards its three-year goal of saving the company $500 million. Additional numbers presented by the CEO included the belief that Nortel can increase enterprise revenues by over $200 million within the next twelve months through a strong commitment to global account structure, adding resources to its direct sales force and increasing inside sales channels. And while the theory sounds good, of course the proof will be in the numbers.

Nortel’s CEO still confident in his plan to rebuild the company

News | May 25, 2006

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