Nortel: CEO Departure Won't Hurt Channel

Nortel Networks' CEO stepped down and its board of directors dissolved into a three-member panel on Monday, but the head of the struggling former telecom giant's enterprise solutions business said partners need not worry.

"We've gone a long way in stabilizing the business," said Joel Hackney, Nortel's enterprise solutions president, in an interview with Channelweb.com.

Despite Nortel's turmoil, Hackney said on Monday that Nortel's enterprise solutions business boosted revenue 18 percent sequentially between the first and second quarter, despite a 28 percent dip year over year. Overall, Nortel's revenue fell 25 percent year over year to $1.97 billion, but increased 14 percent sequentially.

The sequential enterprise increase, Hackney said, shows Nortel's enterprise channel is still gaining traction.

"We're still winning new footprint, deals and contracts," he said. "You don't get those numbers without being committed."

And while Nortel's enterprise division is currently on the auction block, with Avaya leading the bidding at $475 million, Hackney said the channel need not fear the outcome.

"The people who are bidding on the assets see the value of the channel," he said. "What makes the enterprise business valuable is the channel."

CEO Mike Zafirovski's departure, along with the reduction of the board of directors from nine members to three, was a "natural transition point," Hackney said. It became time to streamline the business and stabilize the customer base as Nortel reinvents itself.

For some partners, however, Zafirovski's departure was too little, too late.

"This announcement is more than one year too late," the CEO of one Nortel partner, who asked not to be named, said. "Nortel's board should have made this decision in 2008."

Furthermore, that CEO added, the majority of Nortel's top brass also should resign.

"Mike [Zafirovski] was a waste of time, costing billions in economic meltdown," the solution provider said.

While Hackney said Nortel plans to continue on in Zafirovski's wake, one source within Nortel said Zafirovski's resignation came as a complete shock and no one in the enterprise division had prior warning.

Zafirovski abruptly announced he's stepping down from the CEO post he's held for roughly four years shortly after Nortel's second quarter earnings call. His departure is effective as of Monday and a replacement has not been named.

Along with Zafirovski stepping down, Nortel's board of directors has been reduced from nine to three members with John MacNaughton, Jalynn Bennett and David Richardson leading the charge, and Richardson serving as chairperson.

Zafirovski's departure and the whittling down of the board of directors comes as Nortel says Zafirovski accomplished all he can within the company, guiding it through bankruptcy and leading the Toronto-based company into the sale of the majority of its key assets after scrapping its original restructuring plans.

"We've reached a logical departure point," said Harry Pearce, Nortel's outgoing board chairman, in a statement, "Mike made a commitment to see the process through the stabilization of the company, the sale of its largest assets and the right plans and people to continue operating our business and serving customers. He has done so."

Added Zafirovski: "I am extremely proud to have been associated with this company. The board members and I came to Nortel because we really believed in the value of Nortel's people and technology. Although solid progress was made in many areas, at the end, the capital structure and legacy costs coupled with the economic downturn proved too difficult to surmount."

Zafirovski joined Nortel in 2005 as CEO and was charged with transforming the company. Instead, Zafirovski led Nortel to file for Chapter 11 bankruptcy protection in January and subsequently to sell off the majority of its assets.

Last month, Nortel sold off its CDMA and LTE Access carrier wireless division to Swedish company Ericsson for $1.13 billion. Nortel's enterprise solutions business, the company's second largest division, which includes data networking, VoIP and government solutions, will be auctioned off Sept. 11 with bidding remaining open until Sept. 4.

Hackney said Nortel is looking forward to moving ahead with its plans to sell off its assets and he is both pleased and surprised that the company has been able to show moderate growth in an unstable environment while in the throes of bankruptcy.

"We are at full force ahead, we're committed," Hackney said, adding that Nortel plans on remaining in business in some way, shape or form even after the sale of the majority of its assets. "It was a very natural time for [changes for] the board and for Mike [Zafirovski]."

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