Nortel Networks president and chief executive Mike Zafirovski has stepped down – a “logical departure point” given the status of the company’s restructuring and sales process.
Zafirovski, who had spent more than three years trying to turn around the former Canadian technology icon, told Dow Jones he had first advised the company’s board in April that he had planned to leave in the third quarter.
“A combination of businesses running well, good progress on the sale of (Nortel’s) businesses (under bankruptcy protection) and having just certified second-quarter results, we thought this would be a natural point” to leave the company and shrink the board, Zafirovski said.
Nortel’s board and that of Nortel Networks Ltd. will be reduced to three members from nine. The company will seek Canadian court approval for Ernst & Young Inc., its monitor, to take on an enhanced role with respect to the oversight of the business, sales processes and other restructuring activities under the Companies’ Creditors Arrangement Act proceedings.
It’s also working to identify a principal officer for the Nortel companies in U.S. Chapter 11 proceedings who will work in conjunction with the U.S. Creditors’ Committee, ad hoc bondholders group, and the monitor. That appointment will be subject to U.S. court approval.
Nortel is streamlining its structure and said its key business units – Wireless Networks, Enterprise Solutions, Metro ethernet Networks, Carrier VoIP and Application Solutions and the LG-Nortel joint venture – will report to Chief Restructuring Officer Pavi Binning.
The telecom-equipment maker filed for bankruptcy protection in January. In June it accepted a stalking-horse bid from Nokia Siemens Networks for its wireless assets, putting in motion an auction process in which L.M. Ericsson Telephone Co. (ERIC) prevailed. The proposed wireless-asset sale to Sweden’s Ericsson is controversial in Canada because some argue it includes assets that could undermine Canada’s national security.
Monday, Nortel also said second-quarter revenue totaled $1.97 billion, down 25% from a year earlier but up 14% from the first quarter. It attributed the drop to the economic downturn and to uncertainty created by its creditor-protection proceedings.
Second-quarter gross margin was 38.2%.
Nortel said it had a cash balance of $2.56 billion at quarter-end.
Nortel was suspended from trading by the New York Stock Exchange in January and delisted by the Toronto Stock Exchange in June.