More Job Cuts?

As Nortel scrambles to become more competitive, CEO Mike Zafirovski did not rule out more job reductions, although he said there are no plans currently in place. “Having said that, we’ve been very public with our statements that Nortel will be a very competitive enterprise, and it’s an on-going process. We’re evaluating the best way to reconfigure the company to have strong, profitable growth,” he told Reuters during a visit to Beijing yesterday. Not surprisingly, low-cost countries such as Turkey, Mexico and China are a key components of Nortel’s cost-reduction efforts, which also includes streamlining business processes such as procurement. The company has expanded the number of R&D employees by 30% in the past year to 1,800. “China is becoming much more important for Nortel — not just in revenues but also in employment, as an R&D centre,” Zafirovski told the Globe & Mail. “We have more and more operational responsibilities for all of Asia now being handled out of Beijing. It’s a very good commitment to China but also very smart from a Nortel perspective.”

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5 Responses to “More Job Cuts?”

  1. fish2eyes Says:

    [ Beijing | Reuters News Service, 2 November 2006 ] – Canadian telecom equipment giant Nortel Networks is looking to increase investment in Asia and will not rule out job cuts in more developed markets as it continues to restructure, its top executive said today.

    “We’re not as competitive as we need to be,” CEO Mike Zafirovski told reporters in Beijing on a visit to open a new research and customer service centre.

    “Our costs are not at world-class levels – they will be. Employment, including a shift from high to low cost countries, will be a part of the answer, but that’s a distant to improving processes, including quality.”

    In June, Nortel said it would cut 1 100 jobs, or 3.2% of its workforce, but said it would create 800 new ones in low-cost countries like Mexico and Turkey.

    Over the last year it has also added 400 new research and development jobs in China.

    “There’s no specific plans at this time to have any significant shift in employment,” Zafirovski said, when asked about further job cuts in more expensive places like Canada or Europe.

    “Having said that, we’ve been very public with our statements that Nortel will be a very competitive enterprise, and it’s an ongoing process. We’re evaluating the best way to reconfigure the company to have strong, profitable growth.”

    Asia was one area Zafirovski saw providing future growth.

    Growing in China

    “We want to invest in Asia and we’d love to be twice as big in China two years from where we are today,” he said, without elaborating.

    The company does not break down its China revenues, but second quarter net income in Asia rose almost two-thirds to $449 million, or 16% of the global total.

    Nortel, which has struggled in recent years with earnings restatements, shareholder lawsuits and regulatory investigations, is running a detailed review of its operations so that it can focus on areas where it has market share of at least 20%.

    Zafirovski, who previously worked for Motorola and General Electric, is the latest executive tapped by the company to lead a turnaround.

    Nortel has frustrated investors with huge losses and a much-reduced stock price since the tech bubble burst in 2000-2001.

    A large accounting gain allowed Nortel to report a second-quarter profit in August, but the company said profit margins continued to be squeezed and fell short of its targets.

    Zafirovski declined to give any earnings outlook. The company unveils third quarter results on Tuesday.

    “Many hard cost actions were taken before I came,” he said. “We’ve taken a number since I’ve been here, and those things are not going to stop.”

  2. anonymous nortel employee Says:

    Great, my job might be taken over by a communist country. Way to go Nortel.

  3. Observer Says:

    Excellent post where one can easily draw their own conclusions.

    I do not know if there are any “substantial returns” from LG yet as Owens also indicated “they were learning lessons”. I suspect this was LG he was refering to. On a positive note, Nortel was quick to point out they lead in enterprise in this region but I assume it is SMB which is lower ticket product. Kindly correct me if I am wrong here anyone.

    The previously announced Putian and Huawei interaction may have also benefitted Nortel better towards their aspirations in this region had they materialized.

    In connnection with other Asian aspirations such as WiMax in this region where Samsung and Motorola seem to have an upper hand, I question whether Motorola which was quoted as their last possible dance partner in any partnership/merger is still viable given Mikes past association/dealings , aside from other considerations in restrictions given the company’s position.

    BSNL also openly stated trading jobs was a primary consideration in connection with an order Nortel insisted global competiors have 10 years international experience, ruling out fast growing and profitable Huawei with their low cost product. I have since read BSNL now requires bidders be profitable and question what role Nortel may have played in this decision.

    So what is it exactly that Nortel wants from lower off shore talent when inginuity in engineering is everything. I also question whether they are retaining the industry’s very best engineers that write their own ticket given their problems, and is the offshore by far less expensive talent every bit as qualified as compared to say England or U.S.A. Again, talent in creating the idea is everything in this rapidly changing sector so I question if less is better in this trend too.

  4. R&D employee-borrowed time Says:

    I agree with observers comment/concern on the shift of talent, however I believe the jobs making that shift will be the worker bees. These will be IMO the implementers and the testers, not the visionaries who design from the 10000 foot view and still write their own ticket. I unfortunately fit into the worker bee category but understand and agree with why MikeZ is making these changes. It is what he believes will be best the for the company and shareholder value.
    The problem is, as most companies have learned, they will need to continually go to other 3rd world countries for cheap labor. As R&D people in countries like India,China, and Vietnam get experienced their pay increases accordingly and/or they move to Europe and America to the higher paying jobs. The 3:1 or 2:1 headcount advantage is eliminated in a few short years. Also as we have painfully learned, software updates/patches implemented by overseas cheap labor often have issues, sometimes critical, which requires an American to swoop in and save the day; albeit with a hit to our customer satisfaction in the customers eyes since we caused the problem in the first place. This should be a consideration when determining what percentage of people to outsource and what function they will provide.
    As a last comment, when I call any customer support line as a consumer, nothing dis-appoints me more than having difficulty communicating with someone who speaks poor english and is typically unhelpful. If “this is the way” then I’m worried for our country as a whole…

  5. Michael Says:

    Nortel is totally hopeless.. They have no new product to sell, all the R&D in Canada is gone. All the old products are hopelessly outdated without updated features (no matter how simple) added to it.. Companies everywhere are ripping out old Nortel products and replacing with worse products from other companies because may be there is one single feature in the other product and other companies will actually add features when requested.

    Proof: At least one company ripped out the entire M1+CallPilot voice mail system (2000+ users) and replaced with Cisco VOIP (BAD PHONE)+(BAD VOICE MAIL). Just because that bad voice mail system can send you the voicemail as an email attachment, and CallPilot cannot (or could not).

    There is NO HOPE to do any R&D in those countries as many other firms HAVE ALREADY FOUND OUT.. (Actually, when was the last time Nortel’s oversea R&D centers did any good product?)

    Tech people in China and India are jumping companies every 3 months because the next company next door offers a higher pay.. and you can’t fault them, because you are under-paying them. The market adjusts very quickly. Also, no respect for IP will kill any R&D.

    Nortel has NO HOPE in China. Does anyone know how hard it is to sell ANYTHING in China? European companies like Alcatel / Ericsson were there since WW2 and the “economic interests :)” were there since that time. Even Motorola couldn’t get in..

    BTW, any good tech people in those countries WANTS TO LEAVE those countries. R&D got no respect in those countries. (They are run by sales and marketing).

    But anyway, most ex-nortels are doing better than ever, in companies that are doing way better R&D than nortel has ever done – IN CANADA.

    Nortel must close all R&D centers oversea and have just a big one in Canada.. In Ottawa or GTA. (You can’t expect to hire good engineers in a small town, do you?) If Microsoft only has a single R&D in Redmond, why does Nortel needs to open R&D centers everywhere?

    – an ex-nortel 1994-2001..

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