Nortel Restructures….Again

Mikez-2
In apparently the final restructuring move and another sign it needs to get leaner and meaner to remain competitive, Nortel will slash another 2,900 employees over the next two years, while moving another 1,000 jobs to “lower-cost locations”. Nortel also plans to shrink its real estate portfolio by 500,000 sq. feet this year – a move that follows the $100-million sale of its sprawling corporate headquarters in Brampton, Ont. last year to Rogers Communications. When completed, the moves will save Nortel about $400-million a year: $300-million due to workforce reductions and $90-million related to real estate.

“We are transforming Nortel, and are focused on building a highly competitive organization that drives innovation and profitable growth,” said Nortel CEO Mike Zafirovski, who added the company will maintain its “industry-competitive” R&D spending at 15% of revenue.

It’s another interesting and probably necessary decision – and you wonder if there is any link between it and CFO Peter Currie’s decision to resign yesterday. Clearly, Zafirovski realizes Nortel can’t be competitively viable if its operating costs aren’t reduced. The question is why now as opposed to six months ago? Another way to look at it is Nortel has little choice but to reduce costs if it wants to remain a stand-alone entity – whereas competitors such as Alcatel and Lucent are trying to do it through consolidation and cost synergies.

Update: For more, check out Local Tech Wire, Blogging Stocks and The Street.com.

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22 Responses to “Nortel Restructures….Again”

  1. br Says:

    The news about 2900 ppl going is not good but no surprises. No matter how we look at it, since 2001, this has been a standard figure. This would mean that our workforce will go under 30000. Yikes. Will I survive this round?

  2. 18 years (so far) Says:

    Agree – we have watched the outsourcing and “low cost” center activities for years now. Pros and cons associated….
    Management direction has been clearer in the past year than it has ever been. Mike Z drives his teams very hard. Change hurts at times. Change sometimes makes you question why you do it at all….oh yeah….the pay.

  3. anonymous Says:

    apparently final … hah …

  4. Anonymous Says:

    still a lot of fat on the chicken bone, but doubt the ass kissing, nod to everything benchwarmers will ever go.

  5. nortel employee Says:

    they keep outsourcing the tech support jobs and I keep hearing the complaints from customers saying they are useless and hard to understand when the heat is on for a solution. I can confirm that India’s not all its cracked up to be, they do the basics like recommending code but dialing in and troubleshooting difficult problems is their weakness. I guess their scripts can’t help there. Someday the industry will learn. How much are they really saving compared to lost sales because the customer wants to talk to an American?

  6. br Says:

    I have just learned I might not be impacted by this round of lay-offs. Good luck to rest, especially dudes in R&D.

  7. fire_in_da_hole Says:

    hopefully its a setup to go merge-acquire smaller players and get positioned to tackle the two groups of competition in Enterprise (Cisco, Juniper, Avaya, Huawei) and Carriers (Alcatel, Ericsson, Nokia).

  8. Larry B Says:

    Yes, it’s too bad for the 2900, but the overall company and the remaining employees will be far better off if NT is lean and mean. Robust change is painful…the shareholdrs have paid a far greater price than any employee…you may not want to hear it, but it’s true. Thousands of employees should have been laid off in prior years…Dunn was too busy enriching himself. And Owens, well he meant well, but he didn’t have a clue. Mike Z. is the real deal.

    Most lame equity analysts are late to this game..Merriman is one of the few that sees the potential. The rest are a bunch of techno geeks who are too busy calculating pension obligations in the UK to understand what this management team is possible of.

    The economy is strong still. Laid off employees should go get another job. That can’t be as hard as it was for me to double down on NT for the second time before the split at $2.00. It nearly drove me crazy. Thanks, Mike and keep up the good work.

  9. another Nortel employee Says:

    I have to agree that to run a business the bottom line is the profitibility, but at what costs? Dell ran into the same issues with its Tech support and found that low cost head count is not the way to go (for support) yet Nortel seems to be going in that direction….good luck! some of the customers are a pain in the arse anyway, let them talk to Babu in India and holy crap!! Crap hits the fan!

    I wish some of us grunts would get some profit once in awhile. Upper management seems to be taking all the $$ away from us. I am not even in the 10th percentile of my groups Salary as per the Market Data guide on the HR web page…i mean a total of 6% raise since 2001…what crap! Inflation has got more of a raise than me!

    The whole Six Sigma idea is crap! I feel it would be a good tool to use, however not a whole division of Nortel needs to be in it…we get rid of UMTS because its not profitable, but add this whole group of Six Sigma people from a VP down…where is that profit? I know, its supposed to come from their ideas…yeah right…whatever.

  10. Nortel Employee (who knows till when) Says:

    Well I guess Mike Z is only speaking with the upper management of our customers who don’t really hear the the voices of their own tech guys on the front line. Ultimately, the ‘relocation’ to low-cost-centres will take some time for it to resonate up to their level, by then things may be irrecoverable…

  11. Keith - Customer Says:

    Besides getting rid of people, Nortel needs to look at what outsourcing to India is doing to customer satisfaction. Those folks can’t be understood, don’t know how to dial up or vpn into a system, even though Nortel has published bulletins on using VPN for troubleshooting. Talking to someone in India only delays the inevitable followup call from someone in the states or Canada that will resolve the issue. Not good when $$$’s are being lost on the customer end. I’m in favor of more regionalized centers for tech support (where they actually know who you are)

  12. br Says:

    Even though MikeZ decision yesterday was hard, it was inevitable. For me, it’s a news that tech support is outsourced to foreign countries. I always dealt with support from local teams in US and they were great to help. Also, I don’t think that critical LOBs will be outsourced because it’s against companies ethics. Nortel is not in a business of selling water.

  13. Nortel insider Says:

    Mike Z. held a townhall meeting today, and when pressed by a longtime Nortel employee about whether or not the company will be reinvesting in the pensions of those people who have given their careers to Nortel he suscintly said, if you don’t like it here, quit.

    Mr. Z has lost most of his credibility in my eyes, and in the eyes of so many employees. He doesn’t have to worry about money, but those of us who do just keep getting slapped in the face.

  14. So What Next, Mr. Z.? « All Nortel, All the Time Says:

    […] What Next, Mr. Z.? In the wake of Nortel’s decision to eliminate 2,900 employees over the next two years to save $400-million in operating costs, one question that still lingers is […]

  15. The psychiatrist Says:

    Nortel Insider,

    Although you may find it offensive that Mike Zafirovski is taking a hard nose stance with respect to the pensions of those who have made careers at Nortel,understand that it is not a personal one.

    Mike Z has a ver serious task at hand, and that is to save a company from going astray or worse, which could,would ultimately affect perhaps yours and many other employees livelihoods and their families that depend on them much harder than losing or dwindling pension benefits.

    Although this may sound inconsiderate,this is a result of a trend that Corporate North America started over a decade ago, and as such must live by the result of their actions which have trickled its way through to the average worker right up to top management in just about every industry.

  16. B.S. Meter Says:

    Dear Psychiatrist,

    There you go again. I replied to your comments regarding John Roese’s blog where you defended him and you are doing it again here. The reason for a blog is to get real and honest feedback from the respondents and not to defend anyone. As best that I can tell people are pretty disappointed; they have devoted years of service and the last thing they want to hear is the company being dismissive of their loyal service. If you were a real Psychiatrist you would understand that denying people’s feelings is not good therapy. Now, go back to your peon marcom job and stop policing this blog; the real police is already here.

  17. Mark Evans - We’re Talking Tech Says:

    […] and here’s our Talking Tech podcast). There was lots to talk to about on the telecom front as Nortel unveiled plans to lay off another 2,900 employees to slash operating costs by $400-million a year, while […]

  18. mnbv Says:

    Mike continues to cut people and products, but there are few signs of anything being built, maybe that ethernet-thingy with BT(?) Employees continue to be unhappy. Stockholders are at best unhappy but patient. Ericsson, CISCO, and Nokia announce good quarters. Mike is right that he has to show progress, not just talk about it. Nothing positive yet at Nortel in my opinion. Mike sounds a bit smug in his comments, my info says the UMTS situation was not quite as he portrays.

  19. The psychiatrist Says:

    Take your medication jamezzz,your veering off the road again!

    The giveaway is in the suttleness of your assumption that “employees continue to be unhappy”

    That’s not comparable to the feedback I am hearing or experiencing for that matter!

  20. mnbv Says:

    Psychiarist, you obviously are not tuned into the employees and their concerns, but then the Marcomms group never was… But maybe you are not from Marcomms, they know how to spell subtle.

  21. On the other side now Says:

    Had to come see this, what a laugh. While you are posting here, you won’t even see it coming.

    Here is a parable for you…remember Chainsaw Al. See if this sounds familiar. And if I recall correctly, didn’t Mike Z. take a few lessons at some points in his career???

    What distinguishes Dunlap from his colleagues is that he takes pride in his toughness, expressing only cursory regret for having cashiered thousands of his workers. When Newsweek ran a cover story about corporate layoffs, Dunlap contributed a gleeful column about how wonderful such firings are for stockholders. Then he savaged AT&T CEO Robert Allen publicly for not sacking enough people. He posed as Rambo on the cover of USA Today. And he titled his 1996 best seller Mean Business: How I Save Bad Companies and Make Good Companies Great. (In it, he likens himself to Michael Jordan and Bruce Springsteen, fellow “superstars.”)

    It’s easy to hate Dunlap for the wrong reason, which is that he is a brutal, heartless, arrogant bastard. According to Business Week, Dunlap skipped the funerals of both his parents, failed to support (or even pay attention to) the child from his first marriage, and refused to help pay for his niece’s cancer treatments. But to criticize Dunlap for his cruelty is akin to scolding a lion for killing an antelope. Dunlap lacks conscience? Well, so does the market. If Wall Street were a CEO, it would skip its parents’ funerals, too. And there is logic to Dunlap’s cruelty. Struggling companies do need to shed workers in order to recover. Dumping 35 percent of your employees, as Dunlap did at Scott, may save the jobs of the other 65 percent. Stockholder profits should not necessarily be squandered on the CEO’s favorite charity.

    But there is a right reason to hate Dunlap, which is this: He’s not as good as he looks. Dunlap does not know how to build a company. If capitalism is “creative destruction,” Dunlapism is simply destruction. He prettifies struggling companies for Wall Street, but undermines them in the long term. Both Barron’s and Business Week have chronicled how Dunlap has built his “turnarounds” on cosmetic measures designed to pump up stock prices. At Sunbeam and Scott, he has sold assets to raise quick cash, cut prices to artificially boost sales, and squeezed suppliers for short-term savings at the price of long-term reliability. His R&D cuts have come at a time when other American companies are investing in new technology. He uses PR brilliantly: Hill and Knowlton tout him relentlessly to reporters and investors, winning him an adulatory profile that serves him well. The day he was hired, for example, Sunbeam stock jumped 59 percent on his reputation alone. Dunlap’s companies, too, rely heavily on short-term marketing campaigns and advertising. What he does not do is spend time developing new products, nurturing talent, and cultivating customers. Why? Because he never sticks around a company long enough for that to matter.

    Good Luck.

  22. looking out in Says:

    There wouldn’t be a need for layoffs if our management wouldn’t run roughshod over what is really needed and that is to control spending. Our accounting tools are too many and too old, money given to management would be better spent on saving jobs or eliminating debt. There should not be any bonuses given to anyone if Nortel doesn’t make a profit. Z and his cabinet could cut down on their jet setting and save 20% at least of the money we need. They travel way too much and ride in limos and eat at very expensive restaurants every time they are away from home. That is outragous and needs to be stopped. Z wasn’t worth the millions he got and the management getting free stock options is rediculous. Laying off more people is not the answer, if it was wouldn’t the other layoffs proven that theory? Cut spending at the top and layoff managers that do not have any people to manage.

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