April 07, 2006, 1:36 PM — Nortel Networks Corp. will closely examine all of its product categories and consider dropping out or seeking a partnership or joint venture anywhere it doesn't hold or forecast a 20 percent market share or better, President and Chief Executive Officer Mike Zafirovski said Thursday.
As part of a massive renovation of the company he took over late last year, Zafirovski also is leading big changes in the company's executive ranks and aims to make services and applications a much bigger part of the business. He spoke to reporters at the CTIA Wireless trade show in Las Vegas.
Earlier Thursday, the communications equipment maker disclosed yet another in a series of financial restatements. Nortel said in a filing to the Ontario Securities Commission that it will restate revenue for some periods and defer it to future periods. The Brampton, Ontario, company will disclose more details after the review is finished, it said.
Nortel, which has gone through financial scandals in addition to restatements over the past several years, needs what Zafirovski called "integrity renewal" along with a return to profitability, he said.
"Nineteen ninety-eight was probably the last year we had a good, balanced financial performance," Zafirovski said. "We're too complex to operate, as a company. ... We've tried to be too many things to too many people."
Nortel wants to hold at least 20 percent of every product area in which it competes, Zafirovski said. In areas where that doesn't look realistic, it will consider partnering with other companies or pulling out. If results don't meet goals in a particular geographic area, it may also make changes on a regional basis, he added. In technology categories that are just emerging, namely IMS (Internet Protocol Multimedia Subsystems) and WiMax wireless broadband technology, Nortel aims to lead the market and will give itself three to five years to achieve that goal, he said.
With the money it would have spent on the categories it drops, Nortel will "double down" on investment in areas it sees as more critical to its business, Zafirovski said.
The company has already made some of these calls, Zafirovski said. In February, it spun off its blade-server switch business to a new company called Blade Network Technologies.
Zafirovski doesn't expect the planned merger of Lucent Technologies Inc. and Alcatel SA to change Nortel's competitive situation significantly. Cisco Systems Inc. is Nortel's biggest competitor overall, followed by Telefonaktiebolaget LM Ericsson in the mobile arena. Alcatel is a threat in a few places in the wireline area, primarily in IPTV (Internet Protocol TV) through its partnership with Microsoft Corp., he said.
"The Lucent merger doesn't strengthen Alcatel's lead position in ... those areas," Zafirovski said.
CTIA continues through Friday.