Nortel CEO Mike Zafirovski leaves, board reduced to three directors

Insolvent technology giant Nortel Networks Corp. announced a US$274 million loss, a 25 per cent drop in revenues in the April-June quarter and the sudden departure of its top executive and several directors on Monday.

Mike Zafirovski, a former senior executive of Motorola Corp. who was brought to Nortel in 2005 amid much fanfare and hopes of revitalizing the telecom technology company, is leaving immediately as president and CEO.

Zafirovski said in a release Monday that he believes the company is stabilizing its business, while also recently completing the sale of its wireless division, and scheduling other asset sales under bankruptcy protection.

"The direction has been set and we are now at a natural transition point as we continue to service customers, maximize value through sales and continue restructuring activities," Zafirovski said.

Nortel's board will be reduced to three members, down from nine. Among the departing directors is Harry Pearce, who has been Nortel's chairman and who was instrumental in bringing in Zafirovski.

The company hasn't named another chief executive officer. Instead it will ask for a court-appointed monitor to be given greater responsibility.

It also says a team of executives, including chief restructuring officer Pavi Binning and chief strategy officer George Riedel, will oversee operations and report to the board of directors and monitor.

The company is also proposing to have a what Nortel is calling a "principal officer" for its U.S. operations, which are under Chapter 11 bankruptcy protection.

"There is still much work to be done," said David Richardson, Nortel's new chairman.

"We have the right team and the right structure in place to ensure continuity in our efforts to maximize the value of the businesses, while preserving Nortel's innovative technology platforms and employment to the greatest extent possible."

Nortel also announced it lost US$274 million, or 55 cents per share, partly on reorganization costs of $130 million. That compared to a loss of $113 million, or 23 cents per share, a year earlier.

Revenues slid 25 per cent to $1.97 billion.

Nortel has been operating under bankruptcy protection under Chapter 11 in the United States and Canada's Companies' Creditors Arrangement Act since January.

Originally, Zafirovski said Nortel was aiming to keep its core operations and continue as a smaller technology vendor. However, it has since changed course and is in the process of selling its various business units and assets in a series of transactions.