A Leaner Nortel

LAS VEGAS — Nortel CEO Mike Zafirovski said the networking company would
look to exit businesses where it can’t gain at least a 20 percent market

Zafirovski didn’t specify which businesses these might be.

But the CEO spoke candidly to the press at the CTIA Wireless conference,
acknowledging the company’s poor financial performance for the last several

Zafirovski, in a rare public speaking appearance outside earnings calls,
said Nortel hasn’t had a good, balanced financial position since 1998.

“Our ability to execute has been excellent in some places, but overall,
average to below average,” Zafirovski said. “We’re too complex to operate as
a company. We tried to be too many things to too many people. As a result,
we’re not as strong as we’d like to be in a number of areas.”

Nortel is scrutinizing its own business in the wake of some shaky

Last month, the company said
it will restate 2003 to 2005 results and some earlier results after an
ongoing review turned up instances where revenue was recognized sooner than
it should have been.

Zafirovski said six teams within the company are looking at ways to execute
a “business transformation,” and said he is looking to hire a chief
marketing officer, a chief technical officer and a couple of presidents.

He said the company is looking to expand its operating margin by $1.5
billion by 2009 and improve the balance sheet through stronger corporate

“This used to be a great company,” Zafirovski said. “It can be a great
company again.”

Zafirovski, who joined Nortel from Motorola last October, said Nortel would
look to strengthen its “innovation DNA,” through its successful technology
businesses, such as gear for VoIP , IP Multimedia Subsystems
(IMS) and WiMax.

He said the company would look to shed businesses where it couldn’t gain at
least a 20 percent market share organically, or with the help of partners
over the next three to five years. Such businesses currently account for 65
percent of Nortel’s revenues, he said.

The company has already made good on one of these vows.

In February, it sold its
Blade Network Technologies business to Garnett & Helfrich Capital. IBM, HP
and Sun Microsystems dominate the blade market for telecommunications

Zafirovski also said the Alcatel-Lucent merger
is “great, positive” news for the industry and for Nortel as well, noting
that it wouldn’t change the way Nortel does business.

He said he considers Cisco Systems and Ericsson the primary threats.

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