Dozens of news stories have run in recent months speculating about “what went wrong with Nortel Networks Corp..” So we decided to let ex-Nortel employees and several industry players tell it in their own words. Our oral history reveals the point when the 114-year-old company really started to go off track: a cultural shift from quality product output to a focus on shareholder value. Not to mention, successive years of bad management and financial scandal.
That Nortel is headed for a breakup of some kind is no secret. What no one does know is who will end up owning the storied Canadian telecom equipment maker, and which divisions. Indeed, Nortel was slated to emerge from bankruptcy this month but now it will go up for auction because several entities oppose a Nokia Siemens Networks takeover of the wireless assets.
The tale of Nortel has spun into a soap opera; however, unlike those far-reaching storylines, this one stands to impact real people in real ways. Pensioners, many of whom, sources say, are widows of former Nortel workers, could lose up to 40 percent of their income. (The average Nortel pensioner is 71 years old, receiving $1,000 per month.) Canada is watching its R&D cash cow and one of its top job creators disappear – scenarios that are never welcome, yet especially not in a recession. All the while, no one seems to be holding CEO Mike Zafirovski, his senior executives or the Nortel board of directors accountable for the downfall of the company. Of course, Nortel’s undoing did not happen in just the past three years.
In Their Own Words
On what went wrong, overall, at Nortel...
Nadine Manjaro: I was struggling with that myself. I did a report and looking at their revenue, they have pretty strong revenue, and CDMA is lucrative in terms of profit margins. I think it was more mismanagement. They blame the decline in the economy and cutbacks in CDMA from operators, but I think it was mismanagement. When I look at I overall, that had more than $10 billion in revenue last year, so it’s hard to understand why they went into bankruptcy. ... The company had a strong base, it had a lock on the North American market and they were expanding. Other companies have suffered equally. Even Alcatel-Lucent’s numbers aren’t great but it’s not the CDMA decline that caused the problem – with Alcatel-Lucent it was the merger. It’s how you manage the company.
Manjaro serves as senior analyst of mobile networks for ABI Research and has tracked Nortel throughout her career. She’s been known to challenge Nortel executives for holding fluffy press conferences that she thinks really are aimed at boosting the company’s value to bidders.
