August 11, 2009 3:00 am
Nortel Networks, the Canadian telecoms equipment maker operating under bankruptcy protection, reported better-thanexpected second-quarter results yesterday and confirmed Mike Zafirovski's decision to step down as chief executive.
The company filed for Chapter 11 protection in mid-January after the global recession derailed Mr Zafirovski's plans to restructure the business and change its focus to new growth opportunities.
"Since filing for creditor protection, the business has been successfully stabilised," said Mr Zafirovski, who also expressed confidence that the planned asset sale - including that of Nortel's 50 per cent stake in LG Nortel - would be completed successfully this year or early next year.
"Results for the second quarter demonstrate solid financial performance over the first quarter, while customer metrics remain strong," he said.
Second-quarter revenues fell by 25 per cent year-on-year to $1.97bn, with declines in all segments and regions, but increased by 14 per cent from the previous quarter.
The company, which has cut 5,000 jobs since filing for protection in January, also managed to increase its cash balances to $2.56bn at the end of June, compared with $2.48bn at the end of the previous quarter.
Explaining his decision to step down, Mr Zafirovski said he was confident that the planned asset auction, including the sale of the company's core CDMA/LTE wireless business to Eric-sson for $1.13bn, would proceed smoothly. He added that as the company shrank, there would be "no need for me to stay". He has no immediate job plans.
As part of the management reorganisation, the board of directors will shrink from nine members to three and the company's main business units will report to Pavi Binning, chief restructuring officer.
"We've reached a logical departure point," said Harry Pearce, Nortel's chairman. "Mike made a commitment to see the [company through the process of stabilisation] and the sale of its largest assets . . . He has done so." The right plans and people were in place to continue operating the business and serving customers, he added.
Mr Zafirovski, who took over as chief executive in 2005 after an accounting scandal first brought Nortel to the brink of bankruptcy, said he was proud of what had been achieved at Nortel, including productivity gains and balance sheet improvements.
He admitted it might have made sense for Nortel to raise equity soon after he took over, which would have provided the company with the additional flexibility needed when the market collapsed in late 2008.
He also revealed he had come closed to negotiating several multi-billion dollar acquisitions in 2007 and 2008 - deals which he said would have provided Nortel with the scale to compete in a consolidating marketplace. But the deals had fallen apart because of "high price expectations and the perceived poor outcomes of recent technology mergers".
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