Nortel Replaces CEO Bill Owens

Nortel Monday announced that CEO Bill Owens will leave the company in mid-November to be replaced by Motorola President and COO Mark Zafirovski.

Owens’ departure comes as a surprise given that the 65-year-old ex-vice chairman of the Joint Chiefs of Staff gave every indication he intended to remain CEO after leading Nortel through its financial scandal and refocusing the company on its enterprise operations. Owens became CEO after Nortel fired then-CEO Frank Dunn in April 2004 for cause after determining he helped orchestrate Nortel’s bogus accounting that forced the company to restate years of earnings.

Indeed, speculation has it that Owens’ determination to remain CEO prompted the abrupt resignation of COO Gary Daichendt in June after only three months at the company. Daichendt, an ex-Cisco sales executive, and CTO Gary Kunis, another ex-Cisco executive, were brought on to help inject some Cisco enterprise expertise into the telecom-stodgy Nortel.

Nortel just completed another reorganization that places even more emphasis on the enterprise.

Speculation now has it that Owens’ steadfastness may have cost him his own job.

“It makes you wonder what really went down with ex-COO Gary Daichendt, who apparently quit in May because he wanted to be CEO but Owens and/or the board showed no sign it was going to happen any time soon,” wrote Canada’s National Post technology reporter Mark Evans in his blog. “In a nutshell, Owens’ departure — was he fired, pushed or did he resign? — is another one step forward, two steps back move for Nortel, which has now had three CEOs in the past 18 months.”

In a statement, Nortel Chairman Harry Pearce thanked Owens for his contributions. Pearce himself is new Nortel blood, having been named chairman shortly after Daichendt and Kunis departed.

“At a moment of great challenge and enormous need in the history of this company, the Board turned to one of its own, whose long career embodied the highest levels of trust, integrity and distinguished leadership,” Pearce said. “We needed an experienced, steady hand and Bill delivered. On behalf of our Board, our employees, investors, partners and customers, we will be forever grateful.”

“Bill re-established stability within Nortel and credibility with all its stakeholders. He guided the company in becoming current in its financial reporting and maintained the loyalty of our customers. Mike can now build for the future on the strong foundation Bill Owens has given us,” Pearce said.

Owens, in a statement, said: “As Nortel has said over the past many months ’We are Playing to Win’ and Mike’s coming on board is a most important step along that path. His proven track record in the global telecom sector and the business world will serve this company, our shareholders and our customers extremely well. I’m proud to have him take the helm.

“We are proud of and pleased with our achievements over the past 19 months,” Owens stated. “We are on a very stable, solid footing, with a rebuilt and strong senior management team, are back to regular financial reporting, and are growing business in some of the most important markets in the world. The employees, customers and partners of this great company are world class and I am deeply grateful for their support and dedication. At 65, I’m now pleased to turn over this company to a proven leader to drive our success over many years ahead.”

Zafirovski, 51, has a 30-year career of leadership with two of the world’s highest-profile corporations, General Electric and Motorola. From 1975 to 2000, Zafirovski served with General Electric in a succession of senior executive positions, in a number of the company’s key divisions: president and CEO, GE Lighting; president, GE Capital Mortgage Corp.; and president and CEO, GE Capital Fleet Services. In 2000, Zafirovski joined Motorola, first as president and CEO of the Personal Communications Sector, and from 2002 to 2005, as president and chief operating officer of Motorola.

“Mike Zafirovski has the kind of proven, team-building leadership that has seen him create significant new value during his career in two of the world’s most important global corporations,” stated Pearce. “He’s the right leader to build on the important work of Bill Owens – and take Nortel to the next level.”

Analysts are upbeat on the change.

“Zafirovski is well respected by the street, and seen as a competent manager in the telecom industry,” wrote UBS Warburg Analyst Nikos Theodosopoulos in a bulletin. “We note that Nortel has been in need of telecom and operational experience in the top role.”

“While Mr. Owens deserves praise for stepping into a very tough role after the firing of CEO Frank Dunn, we had been increasingly concerned about strategic drift at Nortel,” wrote CIBC World Markets Analyst Steve Kamman in a bulletin to investors. “In addition, he failed to deliver on a promise for greater transparency in financial reporting. We are very happy to see ’Mike Z’ take over. He is very well regarded as a very strong operational manager. We believe he has the perspective needed to focus Nortel’s strategy. More importantly, he has the guts/drive/stamina to clean house and actually implement it.”

By Jim Duffy – Network World (US online)