Nortel's President and COO Resigns After Clashing With Management

President and COO of Nortel Networks Gary Daichendt resigned from the company today with just three months on the job after butting heads with Bill Owens, vice chairman and CEO. Gary Kunis, CTO at Nortel, who joined the telecom equipment provider just a few weeks after Daichendt's appointment, is also leaving. The announcement comes three days after the company completed the acquisition of all outstanding shares of common stock of PEC Solutions, and after introducing its Applications Center platform for IP-based contact centers. "Gary has made a major contribution to Nortel during his time here and has added value to our strategic initiatives and business plan," Owens said in a statement. "It has become apparent to Gary and me, however, that we have divergent management styles and our business views differ. I respect him for his decision and I wish him every success in his future endeavors." Elizabeth Ussher, an industry analyst, says she "was a little concerned about the cultural fit" of the two former Cisco Systems employees. "[They are] very different cultures." Daichendt's departure came as a surprise, however, to Sheila McGee-Smith, president and principal analyst at McGee-Smith Analytics. "He spoke at the analyst meeting in May and made an excellent impression," she says. "I thought he was very competent and could impact Nortel in a positive way." Daichendt and Kunis's departures are the latest in a series of Nortel management changes. Following former CFO William Kerr's decision to step down from the post, Peter Currie rejoined the company as CFO effective February 14, and assumed the roles of executive vice president and CFO, effective March 14. His previous stretches at Nortel include serving as its senior vice president and CFO from 1994 to 1997, as well as holding several management positions from 1979 to 1992. In March 2005 Owens was appointed vice chairman and CEO. In April 2004, however, Owens was appointed president and CEO, following the ousting of former CEO Frank Dunn. Dunn, along with several other high-ranking executives, including former CFO Douglas Beatty and former controller Michael Gollogly, were fired following an accounting scandal that led to the company having to restate its financial results from several previous quarters. Earlier this month the company returned to reporting its results on time. According to the company's first quarter 2005 earnings, its revenue tallied $2.54 billion, compared to $2.44 billion for the same quarter last year, and reported a net loss of $49 million, or 1 cent per common share, compared to a net earning of $59 million, or 1 cent per common share, for the same quarter last year. "Nortel has its issues with Wall Street in terms of trying to get past the financial problems that they've had with reporting," McGee-Smith says. "Owens has been focused on turning that situation around with the financial analysts. My perception was that Gary was going to be more internally focused, more operation-focused, so it's a shame that Bill Owens now is forced to try and do both." Even so, McGee-Smith does not expect Daichendt's exit to have a huge impact, particularly because of his short tenure. "The fact that he's leaving so quickly after three months says to me there's no permanent damage done. Gary wasn't there long enough to dramatically change the course at Nortel," she says. In the long run, however, "he would've had a very huge, positive impact." Ussher says the change may benefit other companies. "When you get a new management team it takes eighteen [to] twenty-four months before everything gets figured out again....It gives the competitors a bit of a jump." Related articles: Nortel's Single Appliance for Contact Centers The CTI Market Will Grow Along With IP The 2005 CRM Service Leaders--Part I