Nortel's Return From Doom

INNUA Global Connect 2008, Grapevine, Texas - Speaking before its user group today, Nortel [1] CEO and President Mike Zafirovski said the business is back on track and on the right trajectory for continued growth and improvements.

Two years ago, Nortel was in bad shape and launched a transformation plan to cure the company. At that time, the INNUA Nortel user group posed a series of five questions to the telecommunications vendor asking how the company would regain its tech edge, improve quality and operators, and "How do you plan to recover Nortel's luster?" Zafirovski was quite blunt about the last question's true meaning: "When can I stop making excuses to my bosses when I choose Nortel?"

Compounding matters, Nortel was "losing market share in every segment, not cost competitive, and had losses in four of the previous five years," said Zafirovski. The rest of the industry seemed "solid and predictable" when it came to delivering product.

In the two years that have passed, Nortel's transformation plan has taken root and yielded earnings, a better cost structure, and rebuilt leadership and its employee's faith in the company.

Zafirovski made three commitments to the user group audience, saying Nortel would continue building market and customer momentum, even in today's financial environment, drive earnings growth ahead of the market, and continue to make process on the fundamental health of the company.

Nortel sees opportunity in the proliferation of "true" high speed broadband and communications-enabled applications. Hyperconnectivity was once again bandied about, as Zafirovski cited the 1.6 million mobile phones added every day, 5 billion mobile network points expected by 2010 and 10 billion microprocessors to be sold this year.  

The company's growth strategy is aligned on the "megatrends" of enterprise TDM moving to VoIP and ultimately to UC and the proliferation of next generation mobility and convergence.  Businesses will be optimizing their communications while 4G and video drive carrier expansion.

Nortel has adjusted their R&D investment strategies. Two years ago, the company was spending 55 percent of their R&D dollars on their legacy lines; now it's at 20 percent. Instead, the company now puts 60 percent of their R&D into growth and mature product lines and another 20 percent (up from 10) into emerging technologies. Around 70 percent of the current R&D spend is around software products.

In addition to reworking its R&D spending, the company is simplifying its supply chain and intends to spend more money on marketing.

Related articles:
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Nortel considers acquisition [3] spree