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Nortel COO Resigns, DSL Unit Dissolved

Telecommunications equipment provider Nortel Networks announced today that its COO Clarence Chandran would resign and that it would phase-out its digital subscriber line business.

At the same time, soon to retire John Roth, president and CEO of the Brampton, Ontario-based company, said the company would step-up its efforts to find his own successor when he retires next April.

Chandran intends to immediately resign to address complications stemming from a serious knife attack that occurred in Singapore four years ago. The COO first took time off to undergo related surgery in March.

Following the announcement of the Chandran's resignation, Roth said that in view of his own plans to retire in April 2002, the company would immediately launch a search for his successor as CEO.

"Since Clarence is no longer available in our succession planning, I'll be working with our board of directors to undertake a search for my successor. Our priority is to have my successor in place well before I retire to ensure a smooth and orderly transition," said Roth, who plans to stay on until the company's annual meeting next year.

The departure of Chandran and the company's decision to aggressively seek out a new CEO came as no surprise to DSL industry insiders.

Nortel Networks, which competes with Cisco Systems, Ericsson and Lucent, lost a big DSL contract to Samsung recently and while the total U.S. DSL sales have climbed 22 percent this year Nortel is credited with installing only 600,000 lines at $250.00 a line.

A source close to the situation told InternetNews.com Samsung undercut Nortel with a lower bid to install lines for Korean Telecomm.

"Samsung won a 600,000 line at a price of less than you would pay for a modem. They [bid] $125.00 a line and usually its about $175.00 and up. U.S. telecos pay about $300.00. With that, Nortel lost its biggest [potential] customer," the person said.

Nortel, which makes switching, wireless, and broadband network systems primarily for telephone carriers and other communications service providers -- a business which accounts for about 80 percent of the company's sales was also unable to leverage its January 2000 acquisition of Calif.- based Promatory Communications Inc., which develops DSL technology.

The company did not return calls for comment by press time.

But in an interview with the Wall Street Journal, a spokesperson for Nortel said DSL industry technology was "stagnant and undifferentiated."

Dave Burstein, an editor of DSL Prime, disagreed. He said Nortel was plagued by clients who were unable to pay their bills and not by an "undifferentiated" marketplace.

"The problem is Nortel chose to go after competitive local exchange carriers (CLECs), and they are dying. While they got a reasonable set of customers with the acquisition of Promatory, and tapped the Verizon market [through the acquisition] the competitors of telecos were going bust," he said. "DSL is doubling this year in the U.S. and it's growing faster than almost any normal thing in the world."

Nortel also faced stiff competition from France's Alcatel SA, which has operations in 130 countries and over 130,000 employees. And companies like Verizon, which counts about 720,000 paying customers, were an additional thorn in its side. For its part Alcatel says it controls over half of the world market for DSL equipment, with more than six million DSL lines installed last year.



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