Looking Ahead to ’06

Canadian Press has a nice end-of-year feature on Nortel and its new CEO Mike “Mr. Z” Zafirovski. Among the issues raised are Nortel’s growth (expected to trail t by turfing its all-things-to-all-people approach. While Nortel has stabilized itself, the reality there are still plenty of challenges lying the weeds. The first hurdle will be the refinancing of $1.6-billion of debt that comes due in February and June. Does Nortel go to the junk bond market? Does it issue equity? Does it use some of its much-needed cash? Zafirovski is also going to have to make some tough decision on whether Nortel needs to be downsized. Does he, for example, get rid of the enterprise business, which apparently still accounts for only 10% of revenue despite Nortel’s brave talk it is committed to the market. Perhaps Mr. Z. needs to make a call – if he already hasn’t done so – Mr. C. (a.k.a. John Chambers) about an alliance with Cisco. The CP story raises the troubling notion that Nortel’s growth is being hindered by its inability to keep pace with its rivals in the wireless market. This used to be Nortel’s bread and butter so you have to worry if that business is struggling. From what we’ve seen so far from Zafirovski, who has yet to given interviews with the media, he’s been busy overhauling his management team, which should come as no surprise. Once that process is completed, then Nortel will have to hammer out a well-defined strategic to determine where and how it wants to operate. Needless to say, 2006 is going to be a huge year for Nortel and Mike Z.
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