More Thoughts on Zafirovski’s Bullishness

In thinking about why Nortel CEO Mike Zafirovski is so bullish about the company's profit and operating margin prospects by 2008, he's got to have a couple rabbits up his sleeve. Why? Given the volatility of the telecom equipment market and the ultra-competitive environment, it's difficult for any CEO – even Cisco's John Chambers – to base their optimism on sales growth because you just don't know what's come down the pipe. So what does Mike Z. know that the rest of us are missing? A good guess would be he still sees lots of low-hanging fruit to slash operating expenses despite the fact Nortel has slashed 60,000 employees in recent years. Mike Z. must be pretty confident he can still squeeze out big cost-savings by doing some simple blocking and tackling – something ex-CEO Bill Owens didn't address and something ex-CEO Frank Dunn didn't believe was necessary given he was adamant Nortel could continue to be all things to all people. Mike Z., on the other hand, is a former GE executive where profits are paramount. Look at what Nortel is doing with his purchasing program where it's a on a mission to dramatically reduce its costs. This could generate some huge savings, which could trickle down to the bottom line. As well, don't be surprised Mike Z. continues to streamline Nortel's employee base by selling or shutting down some business units. Mike Z.'s no fool so when he talks about better financial results by 2008, you have to believe he's got a plan to get there.

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