Top Nortel Networks executives admitted Thursday that past financial problems had slowed the company\u2019s growth, but said the new management team had a clear strategy to turn the telecommunication equipment maker\u2019s fortune around. \u201cAccounting scandals and other problems has made it very difficult for Nortel to concentrate on more contemporary issues of business,\u201d said Nortel CEO Mike Zafirovski. He said those issues left a leadership void and affected Nortel\u2019s ability to keep on top of\u00a0industry trends. "This cannot be fixed overnight," the Nortel chief said, adding that his management team is aware of the challenges ahead and has "a plan to win." Zafirovski was addressing a press conference at the company\u2019s new headquarters in Toronto. His views were echoed by another top Nortel official. \u201cWe were not able to concentrate on the present like other companies who managed to change with the industry,\u201d said John Roese, chief technology officer (CTO) at Nortel. Roese said that, unlike other tech-based companies, Nortel was not able to concentrate on testing methodology and establishing best practices. But, he said, \u201cthere is no lack of talent and innovation\u201d in the company. On Wednesday, Zafirovski marked his first year at the helm of Nortel. He also had to face\u00a0shareholders that same day who have seen their investments decline by as much as 35 percent in 2006. Among his top priorities, Zafirovski said, is to increase Nortel\u2019s operating margin, which is at\u00a01 percent today, to 13 percent by 2008. To achieve this, Nortel has to hike its gross profits to 43 percent from the current 38 percent, said Zafirovski. Nortel sees opportunities in providing voice-over-IP (VoIP) equipment to business clients and its alliance with Microsoft.Zafirovski said the Microsoft tie-up would combine Nortel\u2019s communication and services with the software company\u2019s leadership in the application space. Roese said the alliance was a realization that voice applications were going to undergo a major shift and Nortel had to align itself with the technology\u2019s key players. The partnership, he said, placed Nortel in a leadership position for the next breed of voice applications. Another aspect of Nortel\u2019s recovery strategy is a focus on products addressing mobility and convergence, enterprise transformation, and services and solutions. The company\u2019s goal is to streamline internal processes and reach US$1.5 billion in operating margin by 2008. To achieve this, Nortel is consolidating more than 100 operational sites. So far the initiative has created two so-called centers of excellence in Mexico and Turkey. Zafirovski said these facilities would provide technical support services to Nortel clients. Nortel also cut down by 70 percent some 700 IT applications that supported its operations. The reduction will result in potential savings of $20 million a year. The company\u2019s supply chain team also renegotiated $700 million of material buy contracts, which resulted in $100 million savings. In February 2004, investors hoped the company had turned a corner after a drastic downturn in the market the previous year. An accounting crisis that surfaced in March that year led to lawsuits and criminal investigations. The company once more restated financial results early this year and last week, and Nortel lowered its forecast for revenue. However, Zafirovski said, the company has people who are aware of what needs to be done. \u201cWe just need to get back on track.\u201d-Nestor E. Arellano, ITWorldCanada.comRelated Link:\n\nMicrosoft, Nortel Partnership Moves ForwardCheck out our CIO News Alerts and Tech Informer pages for more updated news coverage.