Nortel CEO Mike Zafirovski leaves, board reduced to three directors

TORONTO — Insolvent technology giant Nortel Networks Corp. is bidding farewell to chief executive officer Mike Zafirovski in a sudden departure that comes as the company winds down operations and sells off prized assets.

TORONTO — Insolvent technology giant Nortel Networks Corp. is bidding farewell to chief executive officer Mike Zafirovski in a sudden departure that comes as the company winds down operations and sells off prized assets.

Mike Zafirovski, 55, a former senior executive of Motorola Corp. who was brought to Nortel in 2005 amid much fanfare and hopes of revitalizing the telecom technology company, is leaving immediately as president and CEO.

Nortel, a global telecom network vendor that was once Canada’s most valuable company, is in the midst of selling off its key assets after seeking bankruptcy protection in Canada and the United States in January.

It said Monday in a separate announcement that second-quarter revenue fell by 25 per cent from the same time last year and its loss more than doubled, to US$274-million.

Zafirovski said he has been talking with other executives for months about leaving the company during the current quarter, when he believed Nortel would be in a natural transition phase.

“In the end, maybe this was a simple decision to come to an elegant conclusion,” he said in an interview.

“The day we certified the financial results for the second quarter… we thought this would be a good time to announce that (my departure) but also show confidence in the people that will remain.”

Nortel’s board will be reduced to three members, down from nine. Among the departing directors is Harry Pearce, who has been Nortel’s chairman and who was instrumental in bringing in Zafirovski.

Originally, Zafirovski said in January that Nortel was aiming to keep its core operations and continue as a smaller technology vendor. However, it has since changed course and is in the process of selling its various business units and assets in a series of transactions.

“We’ve reached a logical departure point,” said Pearce in a release. “Mike made a commitment to see the process through the stabilization of the company, sale of its largest assets and the right plans and people to continue operating our business and serving customers. He has done so.”

Pearce said Zafirovski had made “great progress” on many fronts, including addressing significant accounting and legal issues and shifting Nortel’s focus from older “legacy” products to “growth” investments.

“It was unfortunate the transformation was derailed by a deteriorating economic climate and the company’s legacy cost structure,” Pearce said.

David Richardson will remain on Nortel’s board and also take the role as Nortel’s new chairman. He also serves as the director and chairman of Air Canada (TSX:AC.B), and its parent, ACE Aviation Holdings (TSX:ACE.B).

Nortel hasn’t named another chief executive officer. Instead it will ask for court-appointed monitor Ernst & Young, which has been working with Nortel since before sought court protection, to be given greater responsibility.

It also says a team of executives, including chief restructuring officer Pavi Binning and chief strategy officer George Riedel, will oversee operations and report to the board of directors and monitor.

Duncan Stewart, director of research and analysis at DSam Consulting and long-time watcher of Nortel, said that he doesn’t see Zafirovski’s departure as either premature or a surprise.

“Zafirovski is an operations guy… and that’s not what Nortel is focusing on right now,” he said.

“He’s not a guy who has an enormous depth of experience at the mergers and acquisitions base. That’s what George Riedel is for.”

Zafirovski said he has received offers from other companies to take a role as chief executive officer, though he didn’t name the interested parties. For now, he said he wants to spend time with his family.

“I will not do anything immediate,” he said.

The outgoing CEO also noted that he won’t be receiving any severance pay as part of his exit package, which makes him the only executive who hasn’t been paid retention fees.

“I’ve put everything into this for the last three and a half years. This has been an effort which I am very proud of, neither results which we wanted,” he said.

“But we came very close this time last year to having the foundation of a great turnaround.”

Also Monday, Nortel reported a US$274-million second quarter loss, worth 55 cents per share, partly on reorganization costs of $130 million. That compared to a loss of $113 million, or 23 cents per share, in the same period ended June 30 last year.

Revenues slid 25 per cent to $1.97 billion.

Nortel is also proposing to have a what it is calling a “principal officer” for its U.S. operations, which are under Chapter 11 bankruptcy protection.

“There is still much work to be done,” said David Richardson, Nortel’s new chairman.

Nortel has been operating under Chapter 11 bankruptcy protection in the United States and Canada’s Companies’ Creditors Arrangement Act since January.

Executives have been working to sell off pieces of the business as part of an auction process.

The first round involved the sale of Nortel’s wireless assets, which it has agreed to sell to Ericsson for $1.13 billion. The deal includes a commitment to employ 800 Canadians from Nortel.

“They’ve made those comments to me… but those commitments to us aren’t nearly as important as the commitments they’ve made publicly and to the Canadian government,” Zafirovski said.

“From all of the companies that I’ve seen to this point in time, in all the business which we looked at, they’ve been the company with the highest level of EQ (emotional quotient). It gives me confidence that they mean what they say.”

The deadline for bids on Nortel’s enterprise business is Sept. 4 while the auction will be held on Sept. 11.

Just Posted

Rural transit service rolled out

2A South Regional Transit will link Innisfail and Penhold with Red Deer

Some Red Deer waste collection schedules change due to holiday season

Tuesday collections will be moved for two weeks

Red Deer ‘champion’ helps hospital by sharing ongoing petition

It’s been about three years since many physicians at Red Deer Regional… Continue reading

Red Deer Airport’s prospects are looking up for 2019

Ultra-low-cost passenger service is on the horizon

Funding down for Red Deer Christmas charities

Food hampers and toys for children going out to those in need

Alberta’s Sundial starts shipping to AGLC this week

Sundial’s Rocky View facility has received the green light from Health Canada… Continue reading

Penny Marshall dead at 75, best known as TV’s Laverne and director of ‘Big,’ ‘A League of Their Own’

Bronx-born Penny Marshall, who found ’70s sitcom success on “Laverne and Shirley”… Continue reading

Chabot scores overtime winner to lift Senators over Predators 4-3

OTTAWA — Thomas Chabot saw an opening and he took it. And… Continue reading

Canadian Marielle Thompson earns World Cup ski cross bronze in season opener

AROSA, Switzerland — Canada’s Marielle Thompson captured bronze at the opening World… Continue reading

Canada doesn’t make Oscars short list for best foreign language film

LOS ANGELES — Canada is no longer in the running for best… Continue reading

Warrant issued for arrest of ‘Schwimmer lookalike’ suspect

LONDON — A British judge has issued an arrest warrant for an… Continue reading

Moneywise: Canadian workers unhappy with pay, want pension plans

Many working Canadians are feeling underpaid and are so worried about their… Continue reading

Brazil police say faith healer has turned himself in

RIO DE JANEIRO — A celebrity faith healer accused of sexually abusing… Continue reading

B.C. hockey coach creates ‘gear library’ to remove cost barrier of sport

VANCOUVER — Nicola Froese says she has always loved playing sports, but… Continue reading

Most Read