TORONTO - Insolvent technology giant Nortel Networks Corp. is bidding farewell to its 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 in a release Monday that he believes the company is stabilizing its business, while also recently completing the sale of its wireless division, and scheduling other asset sales under bankruptcy protection.
"The direction has been set and we are now at a natural transition point as we continue to service customers, maximize value through sales and continue restructuring activities," Zafirovski said.
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. "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. The operating improvements and strategic investments made during his tenure significantly contributed to the fact that Nortel's businesses are so attractive to potential buyers today," Pearce's statement concluded.
The company 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 longtime 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."
Stewart noted that Zafirovski had already made it public that he would exit his post as Nortel wound down.
"I think it would've been a surprise if he hadn't left by the end of September, so it's just a matter of a few weeks one way or the other," Stewart said.
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 bankruptcy protection under Chapter 11 in the United States and Canada's Companies' Creditors Arrangement Act since January.
