Zafirovski Plies Nortel Shareholders with Promises of Renewal

Most CEOs view shareholders meetings as necessary evils, onerous obligations that are part of the big-chair mandate.

As CEOs stand before the great unwashed to deliver a hackneyed homily, they invariably wish they were on the golf course, in a customer meeting, or nearly anywhere else than in front of people who think their shares entitle them to a say in how to run the business. The nerve of the common shareholders!

Such was the case yesterday in a suburban Toronto conference hall where Mike Zafirovski, former operational hatchet man at Motorola and now CEO of Nortel Networks, held court before an audience of approximately 350 shareholders, most of whom still haven’t come to emotional or financial terms with Nortel’s implosion from tech-boom darling to telecommunications-equipment has-been. Tremendous amounts of Nortel shareholder wealth have evaporated over the last six years, and the natives are restless. Yes, caveat emptor always applies, in the stock market as well as in any other market, but Nortel didn’t help matters with its seemingly endless accounting chicanery and financial restatements. It’s hard enough for shareholders to know what they’re buying when they plump down money for stock, but it’s next to impossible to make a rational purchase when you can’t even trust the putative fundamentals.

Anyway, Zafirovski struck the stoic pose yesterday, telling shareholders that Nortel “will be a great company again,” though it might take as many as five years to get there. He also said Nortel is committed to business transformation, integrity renewal, and “growth opportunities with moderate investment.” Integrity renewal, though, does not include reviewing a business decision to build out a wireless network along a controversial rail link between China and Tibet, which a dissident shareholder argued would dilute Tibetan culture, facilitate Chinese troop movement, and the resource-constrained Chinese government to plunder Tibet’s natural resources.

Zafirovski attempted to make a silk purse of a sow’s ear when he said Nortel is not for sale and doesn’t need to merge to survive. Although he intimated that companies have made takeover entreaties to Nortel, I seriously doubt that any of the major players in the telecommunications-equipment market has seriously considered buying the embattled former Canadian giant. The company remains a mess, its research development, by Zafirovski’s own account, has failed to meet expectations, and its employee morale has been severely cratered. The best employees have left, and the rest are suffering the death of a thousand cuts. What’s more, the telecommunications sector continues to undergo wrenching structural change, with fewer service providers and carriers translating into a need for fewer equipment suppliers. The circle of life has become the circle of death.

It’s a good thing Zafirovski doesn’t want to sell, because nobody wants to buy what Nortel is offering. Obviously, that wasn’t a message Zafirovski could deliver to shareholders yesterday.


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