Wireless

Nortel Networks CEO Mike Zafirovski

(Credit: Nortel Networks)

Nortel Networks CEO Mike Zafirovski, who led the company into bankruptcy protection earlier this year and oversaw the sell-off of its wireless assets to Ericsson, will reportedly leave Nortel within weeks, according to a Wall Street Journal report citing "people familiar with the matter."

Nortel representatives did not immediately respond to e-mail seeing confirmation of and comment on the report.

Zafirovski was hired in 2005 to help turn around the company, much like he had done for Motorola's cell phone division. Initially, he had some success building profits from selling wireless gear to U.S. operators. Under his leadership, Nortel invested in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked, and phone companies started to pull back on spending, which resulted in a sharp revenue drop for Nortel.

Once a giant in wireless gear, Toronto-based Nortel filed for bankruptcy protection in Canada and the U.S. earlier this year. And just last month, Ericsson cast the $1.13 billion winning bid in an auction for Nortel's wireless assets, picking up its cash cow, it's CDMA and next-generation LTE wireless technologies. That purchase virtually ensured that Nortel would be selling off the rest of its businesses, instead of reorganizing into a smaller company, making Zafirovski's departure someone inevitable.

Reuters is reporting that Nortel representatives on Friday appeared before a Canadian government committee to answer questions about the sale to Ericsson, which was opposed by BlackBerry maker Research In Motion, also of Canada. "It covets Nortel's next-generation LTE--or "long-term evolution"--wireless assets, which are being licensed as part of the Ericsson transaction. It has argued it was effectively prevented from bidding on them by Nortel," Reuters says.

CNET News reporter Marguerite Reardon contributed to this report.

Ericsson cast the $1.13 billion winning bid in an auction for the wireless assets of bankrupt Nortel Networks, the companies said Saturday.

The Swedish telecommunications giant picked up Nortel's CDMA and next-generation LTE wireless technologies. As part of the agreement, at least 2,500 Nortel workers supporting CDMA and LTE will be offered jobs at Ericsson.

CDMA, or code division multiple access, is one of two major networks operating in the U.S. and is used by Verizon Wireless and Sprint Nextel. LTE, or Long Term Evolution, is 4G wireless technology that will potentially replace today's mobile networks.

"This deal, along with our recently announced Sprint service agreement, truly positions Ericsson as a leading telecoms supplier in North America," Ericsson CEO Carl-Henric Svanberg said in a statement.

The purchase includes the CDMA contracts with Verizon and Sprint, as well as with U.S. Cellular, Bell Canada, and Leap, Ericsson said.

Ericsson was one of three bidders in Friday's auction. Nokia Siemens Networks and private equity firm MatlinPatterson were its competitors.

In mid-June, Nokia Siemens offered $650 million for Nortel's assets. That offer set others into motion and led to the auction.

"Our final offer for Nortel's assets represented a fair price, and we did not enter this process with a win-at-any-cost mindset," Bosco Novak, Nokia Siemens' chief markets operations officer, said in a statement.

Ericsson's bid is still subject to bankruptcy court approval in the U.S. and Canada.

The purchase virtually ensures that Nortel will sell off the rest of its businesses, instead of reorganizing into a smaller company.

"Nortel remains focused on finding the right buyers for our other businesses," Nortel CEO Mike Zafirovski said in a statement.

Once a giant in wireless gear, Toronto-based Nortel filed for bankruptcy earlier this year.

Nortel was founded in 1895 as Northern Electric and Manufacturing and supplied telecommunications gear for Canada's young telephone system. At the height of its glory days about 10 years ago, Nortel was worth $250 billion and had more than 90,000 employees.

Avaya's $475 million bid for Nortel's Enterprise Solutions Business could spell trouble for Cisco in Australia's enterprise telephony market, according to an industry analyst, but it would also be good news for customers.

"They would be a very credible challenger to Cisco," Telsyte telco analyst Gary Tsang told ZDNet Australia on Tuesday. He estimated the companies' joint market share would be close to 30 percent in Australia by 2010: "If they can sustain their current sales level they should become the market leader by 2010."

The planned acquisition of the Nortel division has come at a time of major change for Avaya, which recently appointed its new managing director, Rob Wells, a former executive of Business Objects. Avaya also recently ditched its direct sales model, reverting back to a pure channel model, said Tsang.

The company this week announced it would supply 6,000 IP handsets to Macquarie University via a deal won by one its two major distribution partners, NSC. Nortel had previously been contracted for the university's network refresh.

Should the deal proceed, Avaya is likely to achieve better negotiating terms with the major telcos, too, according to Tsang.

Optus' integration arm, Alphawest, currently has a distribution deal with Nortel and Cisco. Telstra, meanwhile, has flagged Polycom as its preferred IP handset supplier, while on the unified communications front its preferred suppliers are Cisco and Microsoft.

"The market is very fragmented and bringing Nortel and Avaya together will be good for the Australian market in terms of challenging Cisco," said Tsang.

Liam Tung of ZDNet Australia reported from Sydney.

Nokia Siemens Networks will buy Nortel Networks' wireless technology business for $650 million.

Struggling Nortel, a one-time giant in telecommunications equipment, had filed for Chapter 11 bankruptcy in January in hopes of reorganizing. But that is unlikely now.

Nokia Siemens said Friday that it will use Nortel's CDMA and LTE technology to expand its presence in North America. CDMA, or code division multiple access, is one of the two major networks operating in the U.S. and is used by Verizon Wireless and Sprint. LTE, or Long Term Evolution, is 4G wireless technology that will potentially replace today's mobile networks.

"This agreement provides an important strategic opportunity for Nokia Siemens Networks to strengthen its position in two key areas, North America and LTE, at a price that makes good economic sense," Nokia Siemens CEO Simon Beresford-Wylie said in the statement.

As part of the deal, about 2,500 Nortel employees in the U.S., Canada, Mexico, and China can keep their jobs. Nortel said this represents a "significant portion" of the workers associated with that part of its business.

"Maximizing the value of our businesses in the face of a consolidating global market has been our most critical priority. We have determined the best way to do this is to find buyers for our businesses who can carry Nortel innovation forward, while preserving employment to the greatest extent possible," Nortel CEO Mike Zafirovski said in a statement.

Toronto-based Nortel also said that it is working toward selling off the other parts of its business and that it is applying to be delisted from the Toronto Stock Exchange.

The deal with Nokia Siemens, which is expected to close in the third quarter, must be approved by both U.S. Bankruptcy Court and the Ontario Superior Court of Justice.

Nortel was founded in 1895 as Northern Electric and Manufacturing and supplied telecommunications gear for Canada's young telephone system. At the height of its glory days about 10 years ago, Nortel was worth $250 billion and had more than 90,000 employees.

Telecommunications equipment maker Nortel Networks is reportedly in discussions to sell two key business units, a move that may affect its ability to re-emerge from its Chapter 11 bankruptcy status, The Wall Street Journal reported.

Nortel, which filed for Chapter 11 bankruptcy protection in January, has received interest from competitors in its wireless equipment operation, as well as its unit that creates corporate communications networks, according to the Journal.

In September, the struggling telecommunications equipment maker raised the issue of finding a buyer for some of its assets, after it warned Wall Street its financial situation had worsened.

Avaya and Siemens Enterprise Communications are both reportedly interested in Nortel's enterprise networks business, while Nokia Siemens Networks may be interested in snapping up its wireless equipment unit, the Journal reported.

Although Nortel may ultimately sell those two business units, the Journal notes that a source informed the publication that it would be "very premature" to assume such a move would trigger the company's liquidation.

Previously, the company's chief executive had indicated the company would share its reorganization plan with investors in April or May.

Nortel Networks will be cutting an additional 3,200 jobs, or more than 10 percent of its workforce worldwide over the next several months as the company tries to survive a bankruptcy restructuring.

Nortel, which makes telecommunications equipment, had already announced 1,800 job cuts last year. The company currently employs about 30,000 people around the world. In the 1990s and early 2000s, during the telecom boom, Nortel employed about 95,000 workers. And at one point in 2000 the company accounted for one-third of the market value on the entire Toronto Stock Exchange, the Associated Press reported.

But the past several years have been difficult for Nortel as it has struggled to regain its footing in a changing telecommunications market. The worldwide recession has only worsened Nortel's problems. And the company filed for bankruptcy protection in the U.S. and Canada last month.

When it filed for bankruptcy protection, Nortel had about $2.4 billion in cash. The company hoped it could use the cash "to preserve its liquidity and fund operations during the restructuring process." But The Wall Street Journal reported earlier that court documents show Nortel has liabilities of $11.8 billion, but only has consolidated assets of $11.6 billion.

And just last week the company was dealt another blow when it was not named by Verizon Wireless as one of its suppliers to build the cell phone operator's new 4G wireless network that will use a technology called LTE or Long Term Evolution. Verizon plans to begin building the network this year and will aggressively deploy the speedier network in 2010.

Nortel Networks, once a high-flying telecommunications equipment maker, filed for Chapter 11 bankruptcy protection Wednesday.

Nortel has been struggling to regain its footing since the last economic downturn in 2001 and 2002, which hit the telecommunications industry particularly hard. But the recent credit crunch may end up as the death knell for the company, making it difficult for Nortel to fund its operations. At the same time, customers have also pulled back drastically on spending for the company's voice-only equipment.

For the past several months, Nortel's management team has been trying to cut spending. The company has also put some of its assets up for sale in an attempt to survive. But mounting debt payments and a steep drop in revenue appear to have caught up with the company.

The most pressing issue for the Toronto, Ontario-based company is paying the interest on its $3.8 billion in bond debt. Nortel faced a $107 million bond interest payment this week, The Wall Street Journal reported.

While bankruptcy protection doesn't always signal the end of a company, in today's economic climate, it could prove disastrous as the already-struggling company may find it even more difficult to convince customers to buy its gear. Carmakers used this argument recently when seeking a bailout from Congress. They said that customers would be unwilling to buy cars from companies that they feared wouldn't be around to service them.

Nortel has about $2.6 billion in cash, which some analysts have said could help it stay afloat until at least 2010. But as the company sinks deeper into trouble, many industry watchers believe that Nortel will likely be broken apart during Chapter 11 restructuring, with individual businesses sold off one by one.

In December, the New York Stock Exchange warned it would delist Nortel's stock if the company couldn't get shares to trade above $1 minimum. Nortel is currently trading at 32 cents.

Nortel's fall from grace was a result of a series of strategic missteps over the years that chipped away at the company's value.

In 2000, Nortel was worth about $250 billion. The company now has a market value of about $275 million.

Mike Zafirovski came on board as chief executive three years ago to help turn around the company. Initially, he had some success building profits from selling wireless gear to U.S. operators. Under his leadership, Nortel invested in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked, and phone companies started to pull back on spending, which resulted in a sharp revenue drop for Nortel.

In September, Nortel announced more cost-cutting and said it would sell some of its business units. But the company was unable to find a buyer.

Nortel isn't the only big telecommunications equipment maker to struggle. Alcatel Lucent, which has also been trying to get back on track after the telecommunications boom, announced a restructuring late last year.

Nortel is also expected to seek bankruptcy protection against creditors in its home country of Canada.

The news keeps getting worse for telecommunications equipment maker Nortel Networks.

On Thursday the company received notice from the New York Stock Exchange that it faces delisting if it can't get its stock price above the required $1 minimum price tag in the next six months, The Wall Street Journal reported.

Earlier this week, the Journal reported that the company is seeking advice on bankruptcy proceedings.

While Nortel is clearly hurting as most companies these days are from the current economic crisis, the truth is that the company has never fully recovered from the bursting of the telecommunications bubble in 2001 and 2002.

The problem for Nortel is that its bread and butter products are ones used for building voice networks. Over the past decade phone companies have moved away from building networks exclusively used for voice toward converged networks that carry voice, data, and video using Internet technology. While Nortel has tried to keep up with the changing needs of the industry, it has fallen short.

A series of strategic missteps over the years has resulted in the company losing a great deal of its market value. In 2000, Nortel was worth about $250 billion. The company now has a market value of about $275 million.

Mike Zafirovski came on board as chief executive three years ago to help turn around the company. And initially, he had some success building profits from selling wireless gear to U.S. operators. He was investing in new technology, and the company was preparing for the next wave of wireless networks. But then the economy tanked. And phone companies started to pull back on spending. This has resulted in a sharp revenue drop for Nortel.

In September, Nortel announced more cost cutting and said it would sell some of its business units. But so far it hasn't found any buyers for these assets. The company has about$2.6 billion in cash, which some analysts say should help it stay afloat until 2010.

Nortel isn't the only big telecommunications equipment maker to struggle. Alcatel Lucent, which has also struggled to get back on track after the telecommunications boom, announced Friday it is making cuts as it restructures its business.

Shares of Nortel were trading at 38 cents, down 2 cents, at midday Friday.

Nortel Networks, North America's largest maker of phone equipment, reported its biggest quarterly loss in seven years amid a worsening economy.

The company, which has been struggling to get back on track since the last economic downturn in 2001, said Monday that it lost $3.4 billion, or $6.85 a share, during the third quarter of 2008. This includes a $3.2 billion write-down on the value of part of its business as well as deferred tax assets.

Due to sharp losses in the third quarter, the company announced 1,300 job cuts as well as other cuts across the business. Specifically, the company plans to freeze travel, end salary increases, and consolidate upper management, which includes losing at least four top executives. CTO John Roese and Chief Marketing Officer Lauren Flaherty are among the executives losing their jobs.

Since CEO Mike Zafirovski came onboard in 2005, Nortel has lost more than $4.5 billion. And he has cut more 6,000 jobs, or about 18 percent of Nortel's workforce.

Nortel had been struggling even before the economy started to tank. The biggest problem for the telecom equipment maker is that much of the company's wireless sales are centered around an older technology called code division multiple access, or CDMA. This technology is used by Verizon Wireless and Sprint Nextel in the U.S., but it's not widely used outside the U.S. And as Verizon and Sprint move toward next-generation wireless technology, Nortel will have to compete with other suppliers for that new business.

And then there is the economy. Cisco Systems CEO John Chambers noted last week during his company's earnings call that it had seen a sharp decline in sales from September to October. Nortel's Zafirovski also noted that its customers had scaled back spending significantly toward the end of the quarter.

But unlike Cisco, Nortel was already in trouble before the downturn hit. And while Cisco can scale back slightly while it invests heavily in new markets, Nortel is being forced to hunker down and simply try to survive.

The company has already been trying to sell some of its businesses, including its Ethernet switch business. But as the economy worsens, analysts believe it will be even more difficult for the company to find a buyer who is willing to pay the price that Nortel had hoped it could get for the business unit.