Zafirovski Exits As Nortel Moves Into Transition Phase

Nortel Networks announced a series of organizational changes, most notably the departure of President and CEO Mike Zafirovski, as well as the scaling back of its Board of Directors from nine members to three. Nortel's primary business units will report the Chief Restructuring Officer, Pavi Binning. A core Corporate Group will also be established, with responsibility for ongoing restructuring activities and post business dispositions.

Zafirovski was brought on board in late 2005 with a goal of righting the ship, as well as guiding Nortel through the accounting scandals that plagued the company. By most accounts, he brought stability and an air of credibility to the company. But in the end, Nortel's challenges, along with the global economic downturn, were clearly insurmountable, resulting in Nortel filing for Chapter 11 bankruptcy protection in January 2009. 

Zafirovski's departure should eliminate any doubt that the future of Nortel's products will soon be in someone else's hands. The new organizational structure is designed to ensure smooth transitions to new owners and no longer focused on taking the company forward. Nortel's CDMA and LTE wireless business units are already heading to Ericsson for $1.3 billion, after a series of competitive bids from many of the wireless equipment vendors. Likewise, its enterprise products business is heading to the auction block, with Avaya in a stalking horse agreement for a minimum bid of $475 million. Announced in July, bidding on the enterprise products is expected to wrap up in September.  

While there still is plenty of work to be done in navigating through these transitions, as well as managing the remaining business units, these are tasks meant for transition teams, not for a forward-thinking CEO and board.  

Customers and partners are going to have to manage a transition, as well, provided they don't abandon Nortel altogether. In the meantime, competitors are circling Nortel like sharks, picking off customers and growing their own market shares, delivering an unfortunate end to a once vaunted company.