Nortel CEO Resigns, Shamelessly Blames Economy: Bull
After failing to turn around the 127 year-old networking behemoth that was once valued at over $300 billion, Nortel's CEO, Mike Zafirovski, is stepping down. After filing for bankruptcy protection in January, the board of directors has opted to sell the company off in pieces.
In a statement, Zafirovski said that Nortel's "capital structure and legacy costs coupled with the economic downturn proved too difficult to surmount," but that's far from the whole story. In my opinion, it's a gross, sugar-coated oversimplification of what really happened.
Nortel was done in by incompetent executive management and board oversight, and tens of thousands of shareholders, creditors, and employees are paying the price.
Actually, Nortel never recovered from the dot-com bust. The aftermath included a devastating accounting scandal that resulted in the firing of CEO Frank Dunn and the departure of ten executives and five directors. After all that, the new board handed the reigns over to Zafirovski, who failed to make the hard decisions necessary to save the company. Last November, in How Do These CEOs Keep Their Jobs? I wrote this:
Mike Zafirovski, NortelIn all fairness, Zafirovski did make several attempts at restructuring the troubled company, but this was a tough gig for any CEO. Still, I think boards of directors are overly patient with turnarounds, and Nortel's board was guilty of that shortcoming one too many times.
The man credited with remaking Moto's handset business appears to be ineffective at Nortel. Since taking over in November of 2005, operating performance has shown little improvement and the stock is down over 95%.
In a statement, Nortel Chairman Harry Pearce said Zafirovski made progress on getting the company past its prior accounting scandals and legal issues during his tenure. He said it was unfortunate the transformation was derailed by a deteriorating economic climate and the company's legacy cost structure.
Bull. The "legacy cost structure" should have been dismantled years ago, and the economic crisis was just the coup de grace. Frankly, I find the excuses that exorbitantly-compensated executives and directors hide behind to cover up their incompetence to be nauseating.
Incidentally, Jerry Yang of Yahoo (since replaced by Carol Bartz), Jonathan Schwartz of Sun (pending sale to Oracle), and Dan Hesse of Sprint (still struggling) were also on the How Do These CEOs Keep Their Jobs list.