GARY NORRIS
Canadian Press
Thursday, October 03, 2002
TORONTO (CP) - Nortel Networks Corp. is splitting its largest division into two, in a move that may portend the sale of part of the business. Canada's largest technology company also said Thursday that its No. 2 executive is departing and two others are taking his place as Nortel struggles for profitability.
Frank Plastina, president of the Metro and Enterprise Networks division, "has decided to leave Nortel Networks after 15 years of service and contribution to the business," the company said in a statement.
His division, Nortel's largest source of revenue with about 45 per cent of sales, will be cut in two: Wireline Networks and Enterprise Networks.
Sue Spradley was appointed president of Wireline Networks, which sells voice, data and multimedia technology to telephone companies and other communications carriers - the core of Nortel's traditional business. Spradley, 41, formerly headed the division's voice-over-IP unit.
Enterprise Networks, providing equipment to companies, governments and other institutions, gets Oscar Rodriguez as president, with Robert Burke remaining a head of marketing. Rodriguez, 42, moves up from heading the division's intelligent-Internet initiative.
In Nortel's other two divisions, Pascal Debon remains president of Wireless Networks, the second-largest and strongest of Nortel's businesses with 40 per cent of sales, while Brian McFadden continues to head Optical Networks, which generates about 14 per cent of revenue.
"I almost wonder, looking at this, if this is slapping on a lick of paint before you sell part of the company," technology portfolio manager Duncan Stewart of Tera Capital said of Plastina's former division.
"This could be seen as the first step of selling or restructuring in the future," said Warren Chaisatien, an analyst at IDC Canada.
"I don't think anyone would buy Wireline Networks," Stewart said, but he added that amid continued slack spending by Nortel's customers the Enterprise Networks unit is a candidate for divestiture.
"Cisco's killing them there, so maybe they'll just sell it," Stewart said.
For the Enterprise Networks division - largely assets acquired in the 1997 $9.1-billion-US takeover of Bay Networks which initiated Nortel's high-stakes end-of-the-millennium acquisition spree - competing against Cisco Systems "is very tough," said IDC's Chaisatien.
Because Cisco is dominant in enterprise switching and telecom equipment gear, he wondered how valuable Nortel's Enterprise unit is.
"It could raise bit of cash for them, but I don't know much it's going to be."
Still, Chaisatien said, "it is very likely that Nortel will have to cut down on - I wouldn't say fat, because there's nothing much left."
Nortel - whose revenue in the first half of 2002 fell by 45 per cent from a year earlier to $5.68 billion US - announced in late August that it would cut 7,000 more jobs by the end of this year, lowering its head count to 35,000, down from 96,000 at the end of 2000.
Last week, the company said third-quarter sales were even weaker than expected four weeks earlier. Analysts expect the company will announce further cuts as it strives to meet its goal of breaking even next year.
The changes announced Thursday "will result in an enhanced performance-driven business model that will ensure greater accountability and customer alignment," stated Frank Dunn, Nortel's president and CEO.
"Our leadership team continues to be focused on driving the development and deployment of one of the most powerful portfolios in the industry."
As for the departure of Plastina, who turns 40 on Oct. 11, "maybe the board or management is disappointed with the job Frank has been doing," Tera's Stewart speculated.
"On the other hand, maybe Frank is tired of getting his ass handed to him in a sling by Cisco, and maybe he just wants to do something fun for a change, like smashing his head into a brick wall."
Plastina earned a salary last year of $535,000 US - with no bonus after an $828,000 bonus the previous year - plus 1.2 million Nortel share options.
Stewart added that he is "deeply worried" about Nortel's future. With a revenue decline of 15 per cent in its most recent quarter, "Nortel has gone from a company that I thought had enough cash to weather the downturn to - well, there's a genuine risk that this company won't make it."
Nortel shares (TSX:NT) traded higher by as much as 10 per cent shortly after Thursday's announcement, but closed at 78 cents, up two cents on the day, in trading of more than 13.6 million shares.
Canadian Press
Thursday, October 03, 2002
TORONTO (CP) - Nortel Networks Corp. is splitting its largest division into two, in a move that may portend the sale of part of the business. Canada's largest technology company also said Thursday that its No. 2 executive is departing and two others are taking his place as Nortel struggles for profitability.
Frank Plastina, president of the Metro and Enterprise Networks division, "has decided to leave Nortel Networks after 15 years of service and contribution to the business," the company said in a statement.
His division, Nortel's largest source of revenue with about 45 per cent of sales, will be cut in two: Wireline Networks and Enterprise Networks.
Sue Spradley was appointed president of Wireline Networks, which sells voice, data and multimedia technology to telephone companies and other communications carriers - the core of Nortel's traditional business. Spradley, 41, formerly headed the division's voice-over-IP unit.
Enterprise Networks, providing equipment to companies, governments and other institutions, gets Oscar Rodriguez as president, with Robert Burke remaining a head of marketing. Rodriguez, 42, moves up from heading the division's intelligent-Internet initiative.
In Nortel's other two divisions, Pascal Debon remains president of Wireless Networks, the second-largest and strongest of Nortel's businesses with 40 per cent of sales, while Brian McFadden continues to head Optical Networks, which generates about 14 per cent of revenue.
"I almost wonder, looking at this, if this is slapping on a lick of paint before you sell part of the company," technology portfolio manager Duncan Stewart of Tera Capital said of Plastina's former division.
"This could be seen as the first step of selling or restructuring in the future," said Warren Chaisatien, an analyst at IDC Canada.
"I don't think anyone would buy Wireline Networks," Stewart said, but he added that amid continued slack spending by Nortel's customers the Enterprise Networks unit is a candidate for divestiture.
"Cisco's killing them there, so maybe they'll just sell it," Stewart said.
For the Enterprise Networks division - largely assets acquired in the 1997 $9.1-billion-US takeover of Bay Networks which initiated Nortel's high-stakes end-of-the-millennium acquisition spree - competing against Cisco Systems "is very tough," said IDC's Chaisatien.
Because Cisco is dominant in enterprise switching and telecom equipment gear, he wondered how valuable Nortel's Enterprise unit is.
"It could raise bit of cash for them, but I don't know much it's going to be."
Still, Chaisatien said, "it is very likely that Nortel will have to cut down on - I wouldn't say fat, because there's nothing much left."
Nortel - whose revenue in the first half of 2002 fell by 45 per cent from a year earlier to $5.68 billion US - announced in late August that it would cut 7,000 more jobs by the end of this year, lowering its head count to 35,000, down from 96,000 at the end of 2000.
Last week, the company said third-quarter sales were even weaker than expected four weeks earlier. Analysts expect the company will announce further cuts as it strives to meet its goal of breaking even next year.
The changes announced Thursday "will result in an enhanced performance-driven business model that will ensure greater accountability and customer alignment," stated Frank Dunn, Nortel's president and CEO.
"Our leadership team continues to be focused on driving the development and deployment of one of the most powerful portfolios in the industry."
As for the departure of Plastina, who turns 40 on Oct. 11, "maybe the board or management is disappointed with the job Frank has been doing," Tera's Stewart speculated.
"On the other hand, maybe Frank is tired of getting his ass handed to him in a sling by Cisco, and maybe he just wants to do something fun for a change, like smashing his head into a brick wall."
Plastina earned a salary last year of $535,000 US - with no bonus after an $828,000 bonus the previous year - plus 1.2 million Nortel share options.
Stewart added that he is "deeply worried" about Nortel's future. With a revenue decline of 15 per cent in its most recent quarter, "Nortel has gone from a company that I thought had enough cash to weather the downturn to - well, there's a genuine risk that this company won't make it."
Nortel shares (TSX:NT) traded higher by as much as 10 per cent shortly after Thursday's announcement, but closed at 78 cents, up two cents on the day, in trading of more than 13.6 million shares.
