Mike Zafirovski, the CEO of Nortel Networks, has precipitately resigned, leaving the sale of remaining assets unfinished and what's left of the 114 year-old company rudderless and in limbo. So much for his much-vaunted and oft-promised "unqualified, continuing commitment". He's not being replaced, reports Martyn Warwick, after all, what would be the point?
Other are voting with their feet as well. Two thirds of the board of directors went with Zafirovski, including Harry Pearce, Nortel's Chairman. The sudden resignations came as Nortel reported yet another appalling loss, this time of US$274 million for the quarter ended July 30. That's more than double the dreadful loss posted for the same period in 2008. Talk about re-arranging the deck chairs on the Titanic.
Nortel's board of directors is now down to a rump of just three. A few months ago the board had nine members.
Mr. Zafirovski became CEO in 2005 and has presided over one of the biggest disasters in global corporate history - although you'd never think that it you read the oleaginous spin still being slathered all over these calamitous events by Nortel's egregious and shameless PR department.
According to them, "leadership has successfully stabilised the business and improved results over the last quarter. As a result Mike Zafirovski says it is the right time for change."
Happily the spin doctors will not be around much longer themselves. With Zafirovski consigned to the dustbin of history Nortel itself will shortly be no more. Last night the company announced that it is "asking" its accountants Ernst & Young "to take on an enhanced role with respect to the oversight of the business, sales processes and other restructuring activities.”
In other words, the jig's up and the last ones to leave and finally blow out the guttering candles at Nortel's now darkened and Dickensian corporate headquarters will be the insolvency experts originally called in to save the company. Not that they'll be complaining. For them it's been a very lucrative seven month gig since Nortel filed for bankruptcy.
The three board members left to waltz with the corpse are John MacNaughton, a sometime investment banker, Jalynn Bennet, who has been with Nortel since time immemorial and gets the booby prize for being so loyal, and last, but by no means least, David Richardson, an erstwhile Ernst & Younger-er himself who now holds the dubious honour of having been named as Nortel's last-ever chairman. It is to these three unfortunates that falls the unenviable task of shutting up the Nortel shop in as quiet and orderly a fashion as possible.
Meanwhile a skeleton crew of executives will stay elsewhere aboard the listing hulk, manning the pumps and "running" a handful of specific individual units until Nortel eventually and inevitably slips beneath the waves driven by a high tide of abysmal management, incredible losses and unimaginable debts.
Nortel has sold the bulk of its wireless assets to Ericsson for $1.3 billion, has accepted an "stalking horse" offer from Avaya for its enterprise arm and claims to be in “active discussion” to sell off what's left of the company. Nortel will retain ownership of some 3,000 patents, including those relating to LTE technology that Research In Motion (RIM), the maker of the increasingly popular Blackberry devices, wanted to bid for but was prevented from so doing by Nortel itself.
Suddenly though, RIM is back in favour and, it seems, will now be allowed to bid for the patents after all. Mr. Zafirovski said yesterday, "The door is wide open to have discussions with RIM. We agree with their statement that our patent portfolio is a treasure."
But after that brief period of lucidity it was back once again to the bizarre "Alice Through The Looking Glass" world that Nortel has been inhabiting in recent months. According to Zafirovski, “The direction has been set and we are now at a natural transition point as we continue to service customers, maximise value through sales and continue restructuring activities." Incredible.
We are also being asked to believe that were it not for the recession Nortel would have bounced back and been in tip-top condition by now. A company press release reads, "It was unfortunate the transformation [of Nortel] was derailed by a deteriorating economic climate and the company's legacy cost structure."
In October 2005, when Mike Zafirovski was being lined up to take the CEO post at Nortel, the Toronto Globe and Mail observed that he "brings to Nortel the badly needed respect of Wall Street and hands-on experience in the telecom sector, a trait its previous CEO had been lacking." I wonder what it will be saying later today.
If you are in the mood to chuck some money down the drain Nortel shares are still available in some markets at five cents each. Back in 200O they were in excess of $1,200, Nortel boasted a market capitalisation $366 billion, and the company accounted for 36.5 per cent of all activities on the Toronto Stock Exchange. Sic transit gloria mundi.
Hey, but cheer up. It's not all bad. Nortel also says it will establish "an ongoing entity to service existing equipment." That means work for at least two men and a dog - one to sniff out where the kit is and a team of two to mend it. It could even turn a profit. Now that's what I call a legacy.
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