BILLERICA, Mass. — Bill Owens is no stranger to challenges. Before his
telecom career, which currently has him heading Nortel Networks ,
he was a Navy admiral who served as vice chairman of the
U.S. Joint Chiefs of Staff and commanded the Sixth Fleet during Operation
Desert Storm.
In April, Owens stepped into a crisis situation when he took the helm of
Nortel, replacing former CEO Frank Dunn who had just been
ousted amid a
burgeoning accounting scandal.
Not only had the company’s reputation been tarnished, but the criminal
investigations and shareholder lawsuits that followed further complicated
recovery efforts.
Now, four months later, Owens is still addressing problems that took root
before his tenure, but he’s also beginning to put his stamp on the company
and its strategy.
The CEO met with a handful of reporters at the company’s R&D facility here
this week to discuss the consolidation trend he foresees,
highlight attractive technologies and markets and update progress on the accounting
clean-up the company is undergoing.
Leaving Doors Open
In June, the industry buzzed with rumors that Nortel and Cisco were
mulling
a partnership or perhaps even a blockbuster merger.
With the media’s ears wide open, Cisco’s John Chambers said he’d “love” a
partnership, to which Owens responded that he’s “open” to the idea.
The companies never struck a formal agreement, but the potential for one had analysts, customers
and competitors taking notice and pondering the possibilities.
Owens didn’t do anything to squelch the talk of strengthening
ties, saying that he, Chambers and other sector CEOs are “all talking to
each other about what’s best for our companies.”
Alongside the convergence of networking and security, there is
another group of companies that could be in the mix, Owens said, adding that
consolidation is coming for the industry.
This is why he’s directed the Nortel financial team to maximize cash flow. “We want to be the
consolidator,” he said.
Cash conservation is part of the impetus behind
outsourcing all
manufacturing to Flextronics ,
cutting jobs and even
keeping a close eye on travel expenses.
More likely than a major deal with Cisco or another large telecom equipment
company is a smaller partnership with a Chinese manufacturer.
Although Owens believes its R&D efforts give it an edge over overseas
producers, the company is exploring its options with large players in the
Asian market, Owens said.
“We see these companies competing with us in the Western world … in
places that I would not expect them to be yet,” Owens said, citing Huawei
Technologies and others.
Opportunities and Challenges
During the 90-minute meeting, Owens identified a number of promising
areas — mostly security, mobility and multimedia.
There are emerging countries, such as China and India, where there are
opportunities to get in on the ground floor of what could eventually be
lucrative, long-term contracts. But there are also areas of concern, Owens said.
“We are all having difficulty with
optical business. There are too many companies in the optical
world … It takes a huge amount of R&D to keep it going.”
Despite the jam in the optical sector, Owens recognizes that optical is an important part of the bundle of products and
services for carriers. He also foresees Nortel’s need boost its DSL presence.
“I wish we were more in [DSL] today, but we’re not,” he said. “So it’s
something we’re talking about inside of Nortel.”
Accounting/Atoning
Owens admits the accounting problems have been painful, saying he is committed to
getting updated numbers on September 30. Besides restating earnings and
meeting with the financial community, Owens has added to the company’s ranks the
new executive position of vice president of ethics and compliance.
But he had to defend this move in the face of layoffs. “Any company needs that,” he said,
noting not only Nortel’s unique woes, but
also the slew of new regulatory requirements.
He also cited the firing
of seven executives for cause in connection with the accounting probe as
evidence of cleaning up. Meanwhile, Canadian and U.S. authorities are still
investigating the company.
Owens said he doesn’t believe the mindset that created the accounting scandal is widespread in the company’s culture.
“I’ve never seen a company more intent on doing the right things.”
