J. Sturgeon | Financial Post | Aug. 11, 2009In November 2005, he was hired by Nortel Networks Corp. to open a new chapter for the struggling telecommunications firm. Almost four years later, Mike Zafirovski has left Nortel as it moves through what most say is its last.
Monday, Mr. Zafirovski stepped down as chief executive of the bankrupt firm, as did most of Nortel's board of directors.
The decision, which comes as the Toronto-based company is in the process of selling off all of its business operations, was jointly made by Mr. Zafirovski, Nortel's bankruptcy monitor Ernst & Young Inc. and the company's creditor committee.
In an interview, the 55-year-old executive said the decision to go was made because the company, while still losing considerable amounts of money, was "stabilizing" now and that it was in the best interest of all for him and certain board members to step aside.
Nortel's two largest business units have or are on the verge of being acquired by rivals while Nortel is in advanced talks to sell its remaining units. The moves put the company's employees and technological legacy on a secure and "promising path," he said.
The announcement coincided with the release of Nortel's second-quarter results, which showed the company lost US$274-million during Mr. Zafirovski's final three months at the helm, more than double the loss from the same quarter a year ago. Revenue declined 25% to US$1.97-billion.
However, revenue did increase 14% quarter over quarter, indicating some customers are gaining more confidence that the company will honour future contract obligations - or at least whatever company acquires its businesses will.
Mr. Zafirovski said in June that Nortel would sell all its divisions through so-called "stalking horse" auctions as it tries to pay back creditors. The court-supervised sales are designed to set a floor price on the assets and encourage rival bids.
Last month, the company sold its major wireless business, which makes network equipment for mobile-phone carriers, to Sweden's Ericsson for US$1.13-billion. That bid trumped a US$650-million offer from fellow European giant Nokia Siemens Networks. Avaya Inc. has placed an initial US$475-million bid for the Enterprise unit, Nortel's second biggest by revenues, which develops networks for large corporations. An auction is slated for early next month.
"Frankly, we've done a pretty significant job of stabilizing the company, producing good results and increased the interest in our businesses from buyers," Mr. Zafirovski said of Nortel's performance since its bankruptcy filing on Jan. 14.
The 127-year-old company was forced to seek bankruptcy protection after its turnaround plans were sideswiped by the economic downturn last year, Mr. Zafirovski said.
"We were there in the middle of 2008," he said adding that he and other senior managers worked tirelessly to overcome the accounting scandals and related legal woes with investors that had plagued the firm since before his arrival.
He said he expected growth in most of the company's markets last year until the recession hit, leading to double-digit declines in sales across the telecommunications industry.
"We certainly did not have the flexibility to withstand that," he said.
More than a dozen appeals to the federal government made between October and January were rebuffed, Mr. Zafirovski said, as lawmakers were not convinced a bailout would save the firm. "I feel it's something the government should have done," he said. "I understand why it wasn't, but certainly we believe we provided a compelling case."
Alongside Mr. Zafirovski, five directors left the company yesterday. Chairman Harry Pearce as well as John Manley, James Hunt, Richard McCormick and Claude Mongeau stepped down.
Pavi Binning, Nortel's chief restructuring and financial officer will remain to manage operations for the time being. Nortel is also seeking a greater role for Ernst & Young, its court-appointed monitor, in its restructuring activities.
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