Nortel CEO steps down

Mike Zafirovski, the white knight CEO brought in to rescue Nortel Networks, resigned from the beleaguered company this morning, saying he had done all he could and it is time to move on.

Instead of revitalizing the onetime industry giant, Zafirovski watched the global telecommunications equipment maker lose traction against competitors. He finally had no choice but to guide the iconic Canadian company into bankruptcy proceedings in January. As a sign of Nortel’s decline, Research Triangle Park site is down to 1,850 employees from a onetime peak of 8,500.

In a statement the company said it had reached a natural transition point for Zafirovski to step down. As the company winds down operations, the company's board of directors is being trimmed from nine seats to three, a move that ends the board tenure of Jim Hunt, the former governor of North Carolina.

Zafirovski had swept in in 2005 with great expectations, surrounding himself with his own management team, including Joel Hackney, a colleague from General Electric. For now, Hackney remains in place as head of the RTP site while the Enterprise Solutions business unit he heads is in talks to be sold to rival Avaya. Enterprise Solutions accounts for nearly one of every three remaining Nortel workers.

Industry analysts don’t expect 114-year-old Nortel to last as a stand-alone company past this year. Nortel also announced this morning it would be seeking court approval to let accounting firm Ernst & Young, the court-appointed monitor, have a greater role in running what’s left of the company. In the interim, Nortel is temporarily being run by its Chief Restructuring Officer, a position created with the bankruptcy filing.

Zafirovski, 55, is departing with a classic Nortel flourish, proclaiming the company’s solid financial performance, strong customer metrics and maximized value, depsite the company’s losses of nearly $7 billion in the past two years. Nortel issued second-qurater earnings today, reporting that the financial loss for the quarter ballooned by 139 percent to $274 million.

With massive staff cuts, Zafirovski has stopped the worst of the hemorrghaning, but for the past year Zafirvski’s job has been essentially to keep Nortel afloat as long as necessary to cannibalize the company so that rivals could vie among each other to pick off Nortel’s choicest pieces.

Zafirovski’s resignation was widely expected when emerged from self-imposed media seclusion last week and told The Globe and Mail newspaper in Canada that Nortel was ultimately undone by the recession last year. He said Nortel lacked the strong balance sheet and cash reserves necessary to weather the worst economic dowturn in decades.

Zafirovski was brought in to Nortel after accounting scandal led to the ouster of CEO Frank Dunn and nine other top executives. Zafirovski was riding high as a corporate turnaround whiz at Motorola, where as second-in-command he helped revive that company’s wireless unit with the trendy Razr phone.

Zafirovski was now ready to run his own company when Nortel came calling, but from the outset his tenure at Nortel was marked by financial disappointments.