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Sea change at Nortel

Sun, 10/16/2005 - 8:00pm

Copyright 2005 TheStreet.com, Inc.

October 17, 2005 Monday 10:28 AM Eastern Time

By Scott Moritz, Senior Writer

From Lexis Nexis

Nortel (NT:NYSE) set a new course Monday, naming former Motorola (MOT:NYSE) exec Mike Zafirovski as its new chief. Zafirovski, 51, will replace Bill Owens Nov. 15.

The news sent Nortel shares up 15 cents, or 4%, to $3.45 early Monday. Nortel's move to tap a big name in the networking industry is part of a larger effort to get past a lengthy bonusgate accounting scandal that led to a shakeup in the company's highest ranks.

"There are very few companies that combine Nortel's rich legacy of innovative leadership and customer base with its enviable position in the world's most important and fastest growing markets," Zafirovski said in a press release Monday.

Nortel's Owens, once an admiral in the U.S. Navy, said it was time for the move and Zafirovsky was the right man for the job.

"At 65, I'm now pleased to turn over this company to a proven leader to drive our success over many years ahead. His proven track record in the global telecom sector and the business world will serve this company, our shareholders and our customers extremely well," Owens said in the press release.

Zafirovski had been seen as a leading candidate for the job since he left Motorola early this year. He departed the Schaumburg, Ill., wireless titan after being passed over for the top job there.

But Nortel had other plans. The Brampton, Ont., tech giant hired former Cisco (CSCO:Nasdaq) bigwig Gary Daichendt as president and heir-apparent to Owens' CEO job. After three months, however, Daichendt quit, setting the company adrift again.

Nortel looks to be getting back to its core strengths by hiring Zafirovski, who has a strong business background in wireless and networking. Investors were unimpressed with Owens, who was brought in to bring stability to the scandal-rocked company. Owens inherited a chaotic situation and he became a point man as frustration mounted over Nortel's protracted bookkeeping cleanup.

As the accounting morass widened and the company missed numerous filing deadlines, Owens' popularity declined. Like rival Lucent (LU:NYSE), Nortel was mired in a rut, unable to find enough new growth areas to lift it out of the declining sales of its older gear.

Critics cited Owens' lack of telecom equipment experience and limited public-company leadership background as pushing the company to find a long-term CEO replacement.

Zafirovski had left Motorola in January after fulfilling his promise to stay with the company for a year after Ed Zander was brought in as CEO. The Macedonia native spent four years at Motorola, starting as the head of the handset business and rising to the company's No. 2 spot in 2002, when predecessor Ed Breen took the CEO job at Tyco (TYC:NYSE).

Before he joined Motorola, Zafirovski logged 24 years at General Electric (GE:NYSE). Though Motorola had some critical stumbles in the all-important handset business under Zafirovski's watch, he is also credited for helping to tighten the organization by trimming businesses, cutting staff and lowering costs.

When Chris Galvin, grandson of Motorola's founder, stepped down as CEO in late 2003, Zafirovski was in line for the chief job. But Motorola's board chose Zander instead.

"Bill [Owens] re-established stability within Nortel and credibility with all its stakeholders. He guided the company in becoming current in its financial reporting and maintained the loyalty of our customers," Nortel Chairman Harry Pearce said in a press release. "Mike can now build for the future on the strong foundation Bill Owens has given us."

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