As I have stated in my earlier posting today, Mike Z. stays behind closed doors while more information appears in the press.

WHERE IS MIKE ZAFIROVSKI? ENOUGH OF HIS NONSENSE!

From the Globe and Mail-

Nortel bondholders seen preparing for the worst

ANDREW WILLIS, TODAY AT 9:34 AM EST

Post the first comment

Back to the blog

Nortel Network's lenders are said to be preparing for the worst, as a U.S. newswire reports that

bondholders have hired lawyers and are pushing for meetings with executives in the embattled tech

company.

Nortel bondholders have hired New York law firm Milbank Tweed and are asking for talks with Nortel

brass, according to Debtwire, a fixed-income news service run by the Financial Times. (Unfortunately, it's

a subscription-based site.) Such a move would be prudent, as numerous analysts have forecast Nortel

could be forced into creditor protection in the next 24 months. Milbank Tweed is a global firm with a

strong restructuring team - its lawyers are involved in the Lehmen Brothers bankruptcy.

The Debtwire report comes after last month's news that Nortel asked financial and legal advisers -

investment bank Lazard and law firm Cleary Gottlieb Steen & Hamilton - to consider creditor protection

as part of a larger restructuring of the company.

Nortel has declined to comment on its strategic options, though company executives do point out that

there is no immediate financing need, as no debts are due until 2011. Nortel's bonds trade for less than 20

cents on the dollar. Nortel is attempting to sell divisions in order to better focus operations at the former

high-flyer, but those divestiture plans are hampered by the weak prospects for the economy, and cuts in

tech hardware spending.

The news articles and negative statements from analysts combined with the ongoing silence from Nortel execs is doing a great deal of damage.

Given the above, it seems that Nortel execs are building a huge whole from which it becomes more and more difficult to regain the confidence from the investment world.

As Nortel is currently under a time deadline to get the stock price to a level that will satisfy the requirements of the NYSE, I would not be surprise to see Nortel delay required filings. Nortel really has nothing to lose by delaying an filings.

LARRY is not Larry Burtschy. He may be glad of this as I own the stock! I have a good relationship with and alot of respect for NT management and employees. LARRY may make some valid points, but I want to disassociate myself from his comments on Mike Z and others at Nortel. Some NT employees in the Lenovo Lounge asked me if I was LARRY from the blog! I am not. From the beginning until now, I unconditionally back NT management. Well, I want whoever reads this t know that LARRY is not Larry Burtschy. Repeat, I want whoever reads this t know that LARRY is not Larry Burtschy

In today's Wall Street Journal, there are statements from Nortel chairman Harry Pearce-

"Harry Pearce, chairman of Nortel Networks Corp. and a retired vice chairman of GM, also expects more CEO departures. "There's just enormous pressure" to replace CEOs amid the tough economic climate, Mr. Pearce said.

Mr. Pearce thinks many of these changes will be ill-advised. "It's probably the worst time to make a change," Mr. Pearce said. Hiring a fresh leader during crisis "almost invites bad decisions" because a newcomer must act fast before fully grasping the business, Mr. Pearce said. He declined to comment on the future of Nortel Chief Executive Mike Zafirovski, who has been running the troubled telecommunications equipment maker since 2005."

The following is a statement made by the previous chairman, L.R. Wilson about Frank Dunn, from a Business Week article dated June 10, 2002-

"It's not a time for a visionary," says Lynton R. (Red) Wilson, chairman of Nortel's board. "We thought that Frank was the guy with the right kind of skills."

We all know well what Frank Dunn brought to Nortel shareholders. Let us now look at what current chairman Harry Pearce stated about our current CEO/President in an October 17, 2005 press release-

"Mike Zafirovski has the kind of proven, team-building leadership that has seen him create significant new value during his career in two of the world's most important global corporations," said Harry J. Pearce, chairman of the board, Nortel. "He's the right leader to build on the important work of Bill Owens - and take Nortel to the next level."

Well, we all know well what level we have been taken.

For anyone here to say that they fully support current management, well, that kind of statement needs to questioned, to say the least!

NORTEL TO FILE FOR BANKRUPTCY! FROM THE GLOBE AND MAIL-

Nortel to file for bankruptcy protection

Facing $107-million interest on debts, former telecom giant will likely be broken up and sold to

foreign rivals

Article

Comments ( 38)

ANDREW WILLIS AND JACQUIE MCNISH AND MATTHEW HARTLEY

FROM WEDNESDAY'S GLOBE AND MAIL

JANUARY 14, 2009 AT 6:54 AM EST

Former technology titan Nortel Networks Corp. is expected to file for bankruptcy protection as early as

today, sources say, a move that will likely see what was once Canada's great corporate success story

broken up and sold to foreign rivals.

Nortel's board of directors was meeting last night to deal with a financial crisis, as the economic downturn

translates into a sharp drop in orders from phone company clients. The telecom-hardware manufacturer

failed to find buyers for a number of divisions that were put up for sale in September, and faces the

prospect of paying $107-million (U.S.) of interest on its debts tomorrow.

“It is an iconic Canadian name and there will be a great national grieving over this,” said one person

familiar with Nortel's plans.

The company's already crushed shares plunged further in European trading Wednesday as investors

absorbed the development, falling to as little as the equivalent of 35.41 cents Canadian on the Frankfurt

Stock Exchange, before inching back to 37.66 cents, down 2.9 cents from Tuesday's close.

Nortel Networks Corp.

Related Articles

Recent

Mike Z – Nortel's last, best CEO?

Nortel shares plunge ahead of debt payment

From the archives

Bidders on hold as Nortel weighs options

Nortel's shrinking playing field

Fending off bankruptcy, Nortel gears up asset sales

What's next for Nortel? More cost cuts won't be enough

According to sources working with Toronto-based Nortel and its creditors, the company plans to seek

court approval for creditor protection as early as this morning in Toronto and an undisclosed U.S.

location. Nortel executives had no comment yesterday on the company's plans.

Opting for creditor protection would mark an incredible fall from grace for a telecom manufacturer that is

almost as old as the telephone. Nortel easily qualified as the country's largest company at the peak of the

tech boom in 2000, with a $366-billion (Canadian) market capitalization and 95,000 employees.

While still North America's largest telecom equipment maker, Nortel's shares were worth a total of just

$192-million yesterday, and the company has 26,000 staff after a bruising series of layoffs over the past

eight years. Nortel stock that soared to $1,231 at the peak of the tech bubble – reflecting a recent

consolidation in shares – closed yesterday at 38.5 cents on the Toronto Stock Exchange.

Court protection from lenders, and the breakup that will likely follow, would mark the end of chief

executive officer Mike Zafirovski's four-year attempt to turn Nortel around. Mr. Zafirovski was

parachuted into the top job in 2005 after successful stints at General Electric and Motorola. But he was

never able to right a company plagued by a series of accounting scandals – one of his predecessors faces

fraud charges – and weakening demand for its products.

While not bankrupt – the company has an estimated $1-billion in its coffers – Nortel is burning though

cash at an impressive clip, and has $4.5-billion (U.S.) in long-term debt. Major lenders include JPMorgan

Chase, Citigroup and Royal Bank of Canada. Seeking court protection would give the company more

latitude in selling or restructuring factories and research facilities. Air Canada, for example, went this

route in 2003, continuing to fly while cutting jobs and reworking its debts. Duncan Stewart, an analyst at

DSAM Consulting in Toronto, said: “The issue is not whether or not they can pay it. … It's the idea of: If

you know you're eventually going to default anyway, why not do it now and keep the … interest

payments you would have shelled out?”

Typically, companies do not file for bankruptcy protection until they have drained most of their cash. But

the deepening global credit crunch had raised concerns that a troubled company such as Nortel would not

be able to raise enough money to finance its operations during bankruptcy proceedings.

The court filing will come as a shock to the company's bondholders, who had expected Nortel to pay its

debts this week. Shareholders will likely see their holdings all but wiped out.

As a consequence of filing for protection, Nortel can expect to lose significantly more business,

potentially sending the company into a death spiral, analysts say.

The sophisticated equipment made by Nortel carries an expectation from customers – the major phone

companies – that the manufacturer will be around to service networks. One of the reasons the auto makers

gave last month for resisting calls for them to file for bankruptcy protection was that potential customers

would not buy from a manufacturer they did not think would be around to service the vehicles. For the

network equipment industry, that fear is justifiably magnified.

When Nortel said in September that it would put its Metro Ethernet Networks division up for sale – it

makes hardware that carries Internet traffic – revenue fell on fears of sustainability and service.

Now Nortel faces the prospect of selling additional divisions to pay down debts, all under the supervision

of a judge. In addition to selling the Ethernet unit, divisions that could go on the auction block include the

carrier networks unit, which sells gear to phone companies, and the enterprise division that sells telecom

equipment to businesses. Potential buyers for these units are all foreign: Nokia Siemens Networks,

Telefon AB LM Ericsson, Cisco Systems Inc. and China's Huawei Technologies Co. Ltd.

Nortel's storied history in the telecommunications field dates back nearly as far as the telephone itself.

The company was founded in 1895 as Northern Electric Manufacturing Company to begin selling

telephone equipment to other companies as Canada built out its first telecom network.

Throughout the first half of the 20th century, the company's telecom gear business grew steadily, but

Nortel also built telegraphic equipment used on the battlefields of the First World War as well as the first

sound system in Canada for talking movies.

In the 1950s, the company developed electromechanical switches, a technology that would allow direct

phone calls between cities. Nortel was an early pioneer of satellite technologies in the 1960s and helped

build Canada's first cellular telephone networks.

Nortel's fortunes exploded with the dawn of the Internet and the introduction of increasingly sophisticated

modems and cellular technologies. At its peak, this one company accounted for nearly one-third of the

total value of the TSX; the company was worth more than all six big banks combined.

Now the company is being brought to its knees by the prospect of paying $107-million of interest due to

its bondholders this week. However, that is not the only financial deadline facing Nortel. On Dec. 15, the

company was given a 30-day waiver from Export Development Canada on the government agency's

support for up to $750-million of credit. The deadline on that waiver is today.

With a report from Simon Avery

Bo,

The other Larry (Burtschy) made this statement: "From the beginning until now, I unconditionally back NT management. "

WHAT PRICE LOYALTY NOW LARRY BURTSCHY?

Well Bo, you might continue to have a job, but your stock will be worthless!

NORTEL HAS FILED FOR BANKRUPTCY-REUTERS-

Nortel files for bankruptcy protection in U.S.

Wed Jan 14, 2009 8:41am EST

TORONTO, Jan 14 (Reuters) - Nortel Networks Corp (NT.TO: Quote, Profile, Research, Stock Buzz)(NT.N: Quote, Profile, Research, Stock Buzz), North America's biggest maker of telephone equipment, filed for bankruptcy protection on Wednesday, a day before it was due to make an interest payment of about $107 million.

Nortel and a number of its affiliates filed for Chapter 11 bankruptcy protection in the United States, according to a court filing.

"Based on this filing, the board of directors must believe that not only is the fourth quarter bad, but that the first quarter is going to be just as bad or worse," said Duncan Stewart, an analyst at DSAM Consulting in Toronto.

"Although they have cash in the short term, even the medium-term outlook is not enough to make the company viable as a going concern."

Nortel's shares have tumbled along with the company's fortunes, sinking into penny-stock territory in recent months. In mid-2000, at the zenith of the company's success, they were worth more than C$1,100 each, adjusted for a stock consolidation that took place in late 2006.

RBC Capital Markets analyst Mark Sue had said previously that bankruptcy was a "distinct possibility" for Toronto-based Nortel and that it could collapse under its debt load before 2011.

Nortel has faced intense competition from North American and European rivals such as Alcatel-Lucent (ALU.N: Quote, Profile, Research, Stock Buzz), as well as low-cost Asian vendors such as Huawei Technologies HWT.UL.

The company has also suffered as telecom companies scale back spending on the equipment that Nortel makes.

The global economic slowdown has exacerbated Nortel's problems, leading it to warn last month that because of current conditions, its business is under pressure and its cash and liquidity are deteriorating.

In November, it reported a $3.4 billion quarterly loss, cut its 2008 outlook and announced 1,300 layoffs, or about 5 percent of its staff.

It also said it would freeze salary increases, cut back on consultants and review its real estate portfolio. ($1=$1.22 Canadian) (Reporting by Wojtek Dabrowski; editing by Frank McGurty)

Bo, with all due respect, there is no way anyone should have any believability in Mike Zafirovski any more. How could anyone expect him to any credibility in the investment world. On the other hand, he no longer has to worry about investment analysts or disgruntled shareholders. Every existing employee who now has worthless stock will also have to worry about their viability of their respective jobs.

The following, taken from today's bankruptcy press release, when translated in effect means that Mike Zafirovski and the board of directors are failures-

Nortel made this decision with the unanimous authorization of its Board of Directors after thorough consultation with its advisors and extensive consideration of all other alternatives. This process will allow Nortel to deal decisively with its cost and debt burden, to effectively restructure its operations and to narrow its strategic focus in an effective and timely manner.

The Company commenced a process to turn around and transform Nortel in late 2005, and the Company made important progress on a number of fronts. However, the global financial crisis and recession have compounded Nortel's financial challenges and directly impacted its ability to complete this transformation. Nortel is taking this action now, with a $2.4 billion(3) cash position, to preserve its liquidity and fund operations during the restructuring process.

"Nortel must be put on a sound financial footing once and for all," said Nortel President and CEO Mike Zafirovski. "These actions are imperative so that Nortel can build on its core strengths and become the highly focused and financially sound leader in the communications industry that its people, technology and customer relationships show it ought to be. I am confident that the actions we're announcing today will be the fastest, most effective means to translate our improved operational efficiency, double-digit productivity, focused R&D and technology leadership into long-term success. I want to reaffirm Nortel's dedication to delivering world-class solutions and services to customers."

"NORTEL'S FALL FROM GRACE"

FROM THE STAR.COM-

Nortel's fall from grace

January 14, 2009

DAVID OLIVE TORONTO STAR

Finally, some good news for Nortel Networks Corp., if not its long-suffering employees and investors.

The decision of Canada's R&D flagship company to seek court-supervised creditor protection in Canada and the U.S. makes official that Nortel's eight-year struggle to recover from its implosion early this decade is over.

No more repeated rounds of layoffs – 16 in the past decade, chopping Nortel's workforce to a current 26,000 from 95,000 in 2000. No more fuzzy accounting. No more CEO fraud charges. No more class-action lawsuits from irate investors. No more high-profile failures to find buyers for assets in order to rustle up cash. No more polite threats from the New York Stock Exchange that Nortel will soon be delisted for trading below $1 (U.S.).

It's finally over.

Three CEOs during the past eight years, including a bona fide turnaround artist with telecom smarts in current CEO Mike Zafirovski, simply couldn't fix what once was Canada's most valuable company, worth $366 billion (U.S.) in 2000 and a negligible $192 million (U.S.) today.

Nortel shares that topped out at $1,231 (U.S.) – or $124.50 (U.S.), not accounting for a subsequent share consolidation – fell more than 20 per cent Tuesday, to 38.5 cents (U.S.). Even that will likely be wiped out in a bankruptcy protection reorganization, the fate of Air Canada common shareholders when the airline filed for creditor protection in 2003.

But also like Air Canada, Nortel, in whole or in parts, will emerge stronger than today's current shadow of a firm whose value once accounted for two-thirds of the Toronto Stock Exchange.

Given the layoffs, the always mysterious accounting methodology, and the uncertain status of divisions sporadically rumoured to be on the auction block, Nortel long ago ceased to be a place where the best and brightest telecommunications scientists sought to work. For those who've remained, the Nortel corporate culture has been one of survivor guilt.

Enough. How much humbling can one firm take?

Even back-to-the-wall General Motors Corp., in decline since the early 1980s, managed to turn the occasional lusty profit as recently as this decade. There are accounting mavens in Toronto who will explain to you that Nortel has not turned an actual, as opposed to reported, profit in any year since the late 1990s. In its fiscal quarter ended last Aug. 30, Nortel managed to spill $3.4 billion (U.S.) in red ink – which is pretty appalling in the seventh year of a supposed turnaround.

Nortel's epic fall from grace is almost too long ago to recall its origins. Suffice to say that like most of the world's largest makers of telecom equipment, it vastly and rapidly over-expanded in the late 1990s as the Internet went mainstream.

Suddenly Nortel had urgent orders for massive amounts of equipment from its traditional Baby Bell customers, and also from scores of start-up phone companies and Internet service providers seeking to carve out a niche from "incumbent" carriers like Illinois Bell and Pacific Bell. For the only time in its century-old history, the staid business of supplying telecom gear was sexy.

Then, abruptly, the music stopped. First the upstarts telcos ran out of money, often before generating their first dollar of revenue. And in the post 9/11 U.S. recession, the deeper-pocketed incumbents began cancelling orders too.

Meanwhile, Nortel had spent some $34 billion (U.S.) snapping up specialist telecom equipment makers, most of which were duds and had to be written off. There wasn't a lot of time for due diligence when the pool of available computer-engineering talent was limited, and the fear was of losing orders from panic buyers to rivals more resembling a one-stop shop than you.

If it's any solace for those Nortel employees and shareholders who've remained loyal to the firm, hoping for a comeback of the 113-year-old company, the fate of rivals Alcatel S.A., Lucent Technologies Inc. and Motorola Inc. has been scarcely better. The merged Alcatel-Lucent S.A., based in France, lost E$3.9 billion over the past four quarters. Chicago-based Motorola Inc., from which Zafirovski hailed, lost $487 million (U.S.) over the same period.

Only Cisco Systems Inc.. a relative youngster based in San Jose, Calif., and briefly the most valuable company in the world with a market cap of $555 billion (U.S.) in 2000, managed to survive the sharp downturn in good health. Dismissed by Nortel as a single-suited maker of routers, which act as traffic cops for Internet signals, Cisco now boasts a diminished but still prodigious market cap of $96.3 billion (U.S.). With its most recent annual profit of $8.1 billion (U.S.), Cisco could buy all of its weak competitors with just one quarter's worth of earnings.

In its illustrious history prior to the mania of the late 1990s, Nortel made telephones and telephone-switching gear, of course, but also radios, walkie-talkies, traffic lights and even a Manhattan TV studio for one of the big three U.S. networks. More important, Nortel was a pioneer in satellite technology and fibre optics, the glass "pipes" through which Internet signals travel.

But after way too much of a good thing, in way too compressed a time, Nortel was obliged early this decade to shed most of its workforce, close dozens of factories and R&D centres worldwide, and decide which of its divisions to back and which to sell, making too little progress on the last front.

In the relative serenity of creditor protection, Nortel will make still deeper cuts in its cost structure and find foreign buyers for its major divisions. As standalone businesses freed from Nortel's endless accounting and reorganization struggles, the firm's Ethernet, carrier networks gear and enterprise division, which sells telecom equipment to businesses, will be ably focused on the basics of new-product development and maintaining clients' equipment. In recent years, Nortel's client base shrank as its ability to cope with such basics was increasingly in doubt.

The 20 per cent-plus drop in Nortel stock Tuesday was driven by fears Nortel couldn't make a $107-million (U.S.) interest payment on bonds that was due tomorrow.

One hundred and seven million dollars, a mere rounding error in the glory days.

At the height of the global telecom exuberance in 2000, then-CEO John Roth paid $3.2 billion (U.S.) in Nortel's high-flying stock for a three-year-old outfit named Xros Corp., based in Sunnyvale, Calif. For their promising work with tiny silicon mirrors intended to supercharge the speed of Internet light beams, Nortel lavished the equivalent of $36 million on each of Xros's 90 employees.

By any standard of mergers and acquisitions valuation, the price was ludicrous. "But look at it this way," Roth told me then. "I gave up 1.7 per cent of Nortel stock to get Xros. And the next day, Nortel stock went up 5 per cent, because the market thought Xros added great value to us. That's the new math."

The new new math is that Nortel can't make good on a $107-million debt obligation. And that was enough to kill the company.

And Xros? A total writeoff.

Joel Hackney's comments demonstrate a high level of arrogance, and his statements represent insults to shareholders and employees alike-

Bankruptcy filing was in part to preserve $2.4B in cash, Nortel exec says

Hackney says cash to be used to deliver products, support to customers

Matt Hamblen

January 14, 2009 (Computerworld) One major reason why Nortel Networks Corp. filed for protection from its creditors in the U.S. and other countries today was to preserve $2.4 billion in cash, which the company plans to use to provide support and service its customers, Nortel's head of enterprise sales said today.

"The $2.4 billion in cash we have is an important number to understand," said Joel Hackney, president of enterprise solutions at Nortel, in a telephone interview. "That money allows us to deliver products we have committed to customers and allows product support for customers."

Hackney said he was referring to switches and other networking gear that customer have agreed to purchase but that Nortel has not yet delivered. Some of the equipment might not be completely built or provisioned, and some might be waiting to be delivered at some cost.

Product support is an enormous ongoing cost for equipment suppliers and usually involves phone and e-mail contact with Nortel's support staff or its contractors in the event of problems.

Hackney said that as soon as the news was announced today, he began calling the CIOs at Nortel's five largest customers. "They had known about the $4 billion in Nortel debts for a while," he said. "They are savvy, and they get it and said they understand that Nortel is taking decisive actions to ensure it has support and R&D."

Hackney said that some Nortel employees and others might have been shocked by today's news.

"We regret the impact this could have for some of our stakeholders, and we know this is disturbing for employees to go through an unknown process, that's clear enough," he said. "Once we work through the emotion, though, we know this is the right decision ... for long term success."

Hackney said that while some analysts might suggest that Nortel customers in line for an equipment refresh consider alternative providers, he said those customers need to look at why they have always chosen Nortel.

"I'd tell a customer considering a refresh to assess whether Nortel gives you the best value for the progress of your business, does it interoperate with other equipment and give the return on investment," Hackney said. "Those are the same questions as always. I'm absolutely convinced that our value proposition is there as before and only gets stronger with financial protections."

Employees and shareholders of Nortel, everything centers around Mike Z. reputation and legacy, it is Mike Z. future prospects that are the center of attention-FROM BLOOMBERG news:

Zafirovski Future May Hang on Motorola Instead of Nortel Botch

Email | Print | A A A

By Vivek Shankar

Jan. 15 (Bloomberg) -- Nortel Networks Corp. Chief Executive Officer Mike Zafirovski may be able to save himself even if he can’t save his bankrupt company.

Nortel, North America’s biggest maker of phone gear, filed for protection yesterday in North American courts after falling behind on technology and succumbing to the recession. Nortel has lost almost $7 billion since Zafirovski took the reins in 2005, after being passed over for the top job at Motorola Inc.

The bankruptcy may lead to the destruction of the century- old company, since none of its businesses are growing, according to JPMorgan Chase & Co. analyst Ehud Gelblum. If Zafirovski were to seek a new job, employers might focus more on his success at Motorola’s mobile-phone unit than on Nortel, said Bob Concannon, top technology recruiter at executive-search firm Boyden.

“The market might give him a Mulligan on this one,” Concannon said. “He’s got great scar tissue and a good set of eyeballs. He’s got another gig left for a large company.”

Zafirovski, 53, wasn’t available to comment, Nortel spokesman Jay Barta said. The company plans to keep operating through the restructuring. Zafirovski is committed to leading Nortel through the slump and has the support of the board, Barta said.

Others say he may not relish another turnaround effort. Zafirovski, a former General Electric Co. executive, came to Nortel with a mandate of cleaning up a $3.2 billion accounting fraud and winning back customers. At the time, he said it would take three to five years to turn the company around.

Stay for Cleanup

“We will see whether he is kept on to work on the cleanup or like in most restructurings, he exits pretty quickly,” said Paul Hand, managing director of equity trading at RBC Capital Markets in Toronto.

Increased competition from Cisco Systems Inc. and a failure to shift fast enough to new technology from the old code division multiple access standard slowed Zafirovski’s plans. The executive cut about 6,000 jobs, sold off a high-speed mobile unit to work on faster technologies such as WiMax and Long-Term Evolution. So far those ideas haven’t borne fruit, as carriers such as Verizon Wireless and AT&T Inc. predict that the standard won’t be widely used until at least 2010.

“I don’t think it’s an easy industry to navigate through with competition and with the bets that you’re placing on new technologies,” said John Moore, a KDP analyst in Montpelier, Vermont. “I don’t necessarily fault management.”

Zafirovski, who spent 25 years at GE, joined Motorola in June 2000 as president of the company’s mobile-phone business, its largest unit. He was promoted to president and chief operating officer at the Schaumburg, Illinois-based company in July 2002 after he helped reverse market share losses and gain ground on Nokia Oyj.

Leaving Motorola

He left after Motorola chose Ed Zander, a former executive at Sun Microsystems Inc., to lead the company. Zander himself left the phone maker after failing to build on the success of the best-selling Razr device.

Yesterday, Motorola announced plans to cut 4,000 jobs, joining AT&T Inc. and Verizon Communications Inc. in trimming payrolls to shield themselves from the global slump. Money markets in the U.S. seized up following the Sept. 15 failure of the securities firm Lehman Brothers Holdings Inc.

Nortel also blamed the recession for its foray into bankruptcy. Another part of Zafirovski’s problem was that the talent pool at Nortel wasn’t deep enough as at Motorola, Concannon said.

On Zafirovski’s watch, Nortel hired Chief Financial Officer Pavi Binning, a former Hanson Plc executive; Chief Technology Officer John Roese, who previously served at Broadcom Corp.; and GE’s Joel Hackney, hired as the president of Nortel’s enterprise unit. Roese has since left, a victim of Zafirovski’s latest round of job cuts.

Zafirovski’s work at Nortel also suffered from a lack of focus, said JPMorgan’s Gelblum. He should have split up the company earlier and concentrated on one part of the business, perhaps the wireless unit, he said. Instead, Zafirovski tried to run a company with a smorgasbord of offerings.

“He tried to treat it like John Chambers treats Cisco, which is the CEO being way up top, having division leaders and presidents running the businesses,” Gelblum said. “He didn’t have the talent for those businesses to run themselves. He needed to be at every sales pitch, but he couldn’t do it all.”

To contact the reporter on this story: Vivek Shankar in San Francisco at vshankar3@bloomberg.net

Last Updated: January 15, 2009 00:01 EST

No current Nortel employee should feel safe or secure! From CNN-

UPDATE: Nortel Rivals May Gain As Customers Seek Stable Cos

January 14, 2009: 03:02 PM ET

(Updates with ShoreTel CEO comments, share prices)

By Kejal Vyas

Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Nortel Networks Corp.'s (NT) filing for bankruptcy protection could help competing network-equipment providers gain new customers, but it also could hurt Nortel suppliers like Flextronics International Ltd. ( FLEX) and Polycom Inc. (PLCM).

Although it's early to say, competing network-equipment providers, most notably Motorola Inc. (MOT) and ShoreTel Inc. (SHOR), could benefit as some of Nortel's customers will likely look for more stable suppliers, analysts say.

Earlier Wednesday, citing a need to put itself "on a sound financial footing once and for all," Nortel said it is seeking creditor protection in Canada while some of its U.S. subsidiaries filed for Chapter 11 bankruptcy protection.

The struggling Toronto-based company said the global financial crisis and recession have severely hit its efforts to turn itself around, which have been going on since 2005.

Among larger telecommunications players that could gain, Motorola's mobile- networking-equipment unit held up rather well in 2008 compared with other parts of the company, said Todd Rosenbluth, a telecommunications analyst at Standard & Poor's Equity Research.

With that in mind, "we contend telecom carriers will shift spending to suppliers with relatively stable operations like Motorola" as contracts come up for renewal in the weak economy, Rosenbluth said.

A Motorola spokesperson declined to comment.

In the small-cap telecom arena, Wedbush Morgan said ShoreTel, a provider of Internet telephony hardware and software, could seize market shares if Nortel is unable to hold on to its position as the third-largest enterprise voice- equipment maker.

Nortel's announcement is a reminder of the difficulties that lie ahead for traditionally top-tier telecom names, said ShoreTel Chief Executive John W. Combs, calling it "a milestone." A shift toward newer technologies has hit telecom giants, with many now having to spend money to keep up, Combs said, adding that his company is strategically positioned to gain.

While both companies may stand to gain, their shares fell Wednesday on a weak day for the overall market. Motorola slipped 3.7% to 4.16, while ShoreTel lost 6.4% to 4.10.

"There is still some near-term uncertainty," said Gartner analyst Mark Fabbi, as investors wait to see what Nortel's fate is and how its hopes to sell off some assets pan out.

And before some of the smaller players step up, Fabbi said, larger dominant companies will be able to hold on to their share first, highlighting Cisco Systems Inc.'s (CSCO) top position in the enterprise voice-equipment market.

A Cisco spokesperson wasn't immediately available to comment. Shares of the company edged down 3.7% to 15.83.

On the flip side, suppliers to Nortel will likely take a knock. Shares of Flextronics shed 11% to 2.66 as the electronics-manufacturing-services company disclosed that Nortel was a major customer. In a release, Flextronics said it had been working to reduce its exposure to Nortel for "several months."

Elsewhere, the news could hurt Polycom, which was a "strategic global partner" with Nortel, Wedbush said. Still, the damage is expected to be marginal because Polycom already has similar partnerships with other industry leaders like Cisco and Avaya Inc. (AV).

A Polycom spokesperson wasn't immediately available to comment. Polycom's stock dropped 3.5% to 13.93 a share.

-By Kejal Vyas, Dow Jones Newswires; 201-938-5460, kejal.vyas@dowjones.com

(END) Dow Jones Newswires

01-14-09 1502ET

Copyright (c) 2009 Dow Jones & Company, Inc.

Yep! More Nortel layoffs should be expected, from gigaom.com-

Updated: Nortel Is Bankrupt, More Layoffs Coming

Stacey Higginbotham | Wednesday, January 14, 2009 | 5:58 AM PT | 9 comments

Updated with confirmation, comment from Nortel: In a sign of just how deep the troubles of the troubled telecommunications industry currently run, The Globe and Mail is reporting — and Nortel Networks has now confirmed — that the equipment maker plans to file for bankruptcy, perhaps as soon as today. The Canadian company has $4.5 billion in debt, and faces declining sales for its gear as operators pause network deployments. To further its woes, Nortel is having a tough time selling off its metro Ethernet division, a move aimed at raising more cash.

Nortel could not be reached for comment, but Bankruptcy rumors have dogged the company in the last few weeks. Tomorrow it has to make a $107 million interest payment on its debt — something that analysts know it can do now, but are worried about down the road. It’s odd that a company with cash on hand would file for bankruptcy, but Nortel could already have expressions of interest from potential buyers who could buy the company without its debt burden after a trip through the bankruptcy courts. A company spokesperson, via email, said simply that, “After full consideration of all other alternatives, and in light of the current adverse economic environment, Nortel concluded this step is in the best long-term interests of Nortel and its stakeholders.”

The Globe and Mail proposes a bleaker scenario, speculating the Nortel may choose bankruptcy now because it’s concerned about its ability to raise financing to get it through the bankruptcy process if it waits until its coffers run dry. In that case, an earlier bankruptcy could make Nortel a better target for a buyer interested in keeping employees and healthy product lines.

“Nortel must be put on a sound financial footing once and for all,” said Nortel President and CEO Mike Zafirovski said in the press release announcing the move. Of course, Nortel has been trying to turn around since the telecom bubble burst:

The Company commenced a process to turn around and transform Nortel in late 2005, and the Company made important progress on a number of fronts. However, the global financial crisis and recession have compounded Nortel’s financial challenges and directly impacted its ability to complete this transformation. Nortel is taking this action now, with a $2.4 billion cash position, to preserve its liquidity and fund operations during the restructuring process.

As far as its employees go, the Nortel spokesperson said the company wasn’t making any related layoff announcements. “However, our costs still need to come down. As part of our comprehensive restructuring, we do expect that there will be further layoffs.”