Nortel Appoints a New Chief

On Monday Nortel Networks announced that it had named Mike Zafirovski president and CEO, taking over the top spot at the troubled communications enterprise from Bill Owens. Owens, who became vice chairman and CEO to lead the company out of a period marked by a major accounting scandal and numerous executive departures, leaves after a mere 18 months on the job. Owens joined Nortel with only a period as chairman and CEO of satellite technology firm Teledesic LLC to mark his experience with telecommunications. Prior to that he was president, COO and vice chairman of high-tech firm Science Applications International Corporation (SAIC). His most notable leadership roles, though, were in the United States military, where he was a submarine squadron commander and eventually was appointed vice chairman of the Joint Chiefs of Staff. Despite Owens's relative lack of experience in the industry, Harry Pearce, Nortel board chairman, praised Owens's service and affirmed that choosing him had been the right move at the time. "At a moment of great challenge and enormous need in the history of this company, the board turned to one of its own, whose long career embodied the highest levels of trust, integrity and distinguished leadership," Pearce said. "We needed an experienced, steady hand, and Bill delivered." According to Owens, he stepped down voluntarily. "I was not asked to step down. I believe that when the time is right for the next phase, you should cheer it on," Owens said at a press conference, noting that he had been part of the decision-making process that resulted in Zafirovski's appointment. "With the stability we have achieved at Nortel, this is the time for the next phase to take place." Zafirovski will start his new role on November 15, 2005. He joins Nortel after five years with Motorola, including three as president and COO, a job he left in January 2005 (after failing to get the CEO position). His prior experience includes 25 years with General Electric, serving in a number of senior executive positions in the company's many divisions. Nortel's stock rose approximately 5.5 percent on the announcement, suggesting confidence in the move. "Mike can now build for the future on the strong foundation Bill Owens has given us," Pearce said. According to Zafirovski, that future will include growth in its three major operational regions North America, Europe, and Asia; more attention paid to R&D; and a focus on strategy. Though he provided no timetable, Zafirovski expects to have Nortel's operating margins in the teens. "We're going through too much pain to only have operating margin levels of low to mid-single digits," he said at the conference. Analysts expressed lukewarm sentiments over the change of leadership. Michael Disabato, service director for network and telecommunications strategies at Burton Group, said, "Nortel's been going up and down for so long, I guess it can't hurt." According to Disabato, the effects of such moves may take years to be felt. "Nortel is going to have a very long road to go, it will take a very long time to tell if [appointing Zafirovski] is a good thing." Food for thought: In April 2005, Michael Lawrie was removed as CEO of Siebel Systems after less than a year in the position. The stated reason when George Shaheen replaced him was poor financial results, but it appears that Shaheen's appointment was for change management before the company's acquisition by Oracle. The fast turnaround and troubled recent history at Nortel are only superficial parallels, but the situation bears watching. UPDATE: 20 October 2005 The hiring of Mike Zafirovsky may be on hold, due to recent developments. It has been widely reported today that Motorola filed a suit against Zafirovsky in Washington, D.C., to block the former CFO's appointment because, allegedly, his signed a noncompetition agreement with his former employer in exchange for a $30 million severance package. Motorola also is seeking to prevent Zafirovsky from hiring away any other Motorola employees. The suit is against Zafirovsky himself, not Nortel, which may be an important distinction. In a similar case, Microsoft sued Google over the hiring of Kai-Fu Lee, a former employee with a noncompete agreement, and has so far prevented him from doing any work that could be considered in competition with Microsoft. By suing Zafirovsky directly, however, Motorola hopes to prevent Zafirovsky from joining Nextel in any capacity for two years, to prevent disclosure of trade secrets. Related articles: Nortel's President and COO Resigns After Clashing With Management Nortel's Single Application for Contact Centers