What Would John Chambers Have Done for Nortel?

by: Mark Evans November 18, 2008 | about stocks: NT    
Mark Evans

Mark Evans

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If Nortel’s (NT) board had selected a different person to succeed Bill Owens as CEO in 2005, do you think things would be much different?

What if Nortel had somehow been able to convince John Chambers that after a long and successful run as Cisco’s CEO, Nortel represented the ultimate challenge in his professional career - and that if he did well, there would be glory, generous compensation and the enduring gratitude of investors.

What would Chambers have done differently?

My sense is he would have moved more aggressively, ruthlessly and decisively to get Nortel back on the right strategic direction. Much like ex-Cisco executives Gary Daichendt and Gary Kunis wanted to give Nortel an extensive makeover right away, Chambers probably would have embraced the same tactic.

And he would have been able to convince the Nortel board to go along with his plan.

Second, Chambers would probably have made some major strategic acquisitions to jump-start Nortel’s new direction. We’re talking $500-million to multi-billion dollar deals that would have been executed much better than Nortel’s $9-billion purchase of Bay Networks. In comparison, Nortel has made four acquisitions and spent less than $150-million since Zafirovski joined Nortel.

Chambers would have also hired a different kind of management team with solid telecom and enterprise experience. A guy like Mike Volpi might have been hired to lead the enterprise business, and then be groomed as Chambers’ successor.

Of course, hindsight is 20-20 but that’s why it’s so much fun to look back at what if.

So, what do you think Chambers would have done differently?

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This article has 12 comments:

  •  
    Nov 18 08:29 AM
    First he would not read your pathetic comments.
    Take a moment and read what you have written about Nortel for the past 9 months. Does it ring the bell? It tells a lot.

    LH
    Reply | Link to Comment
  •  
    Nov 18 11:30 AM
    LastHopes comments to the contrary, I think that you're bang on with your comments. Nortel needed a radical change in strategy, organization, and leadership back when it would have actually mattered (2000 - 2005). Z actually looked like he was the one for the job but hasn't stepped up. He and his band of jackasses have failed and failed miserably. His leadership abilities have turned out to be wildly over rated, proving Motorola's decision not to make him their CEO a correct one.

    While hindsight is both fun and 20/20, I don't think that it was required a few years ago to get Nortel on the right course. Chambers would have been the only one capable of turning Nortel around. He still may, yet, with Nortel's stock at the current levels. :-)
    Reply | Link to Comment
  •  
    Nov 18 01:40 PM
    John Chambers could have turned Nortel around, but why would he want to be involved with a loser company. Nortel had the turn around opportunity in their hands recently, when they employed with Chambers's #2 man Gary Daichendt as COO (who wanted the CEO Nortel position). They drummed him out, ridiculing his devote religious beliefs. You certainly don't want an honest person who has accountability to a high power being CEO.

    The problem with Nortel goes beyond leadership, it is the culture.
    Look at John Chambers, he has been the CEO for 20 yrs at Cisco and exemplified his commitment to Cisco for several years only taking a 1$ yearly salary and the rest was purely performance driven compensation (i.e. stock options).

    Nortel on the other hand, has had at least seven CEO's that I can remember (Fitzgerald, Stern, Monty, Roth, Dunn, Owens and Mr.Z) in that same period. Of that lot, only Monty and Fitzgerald were CEO material.
    Reply | Link to Comment
  •  
    Nov 19 10:29 AM
    Actually the real issue with Nortel is middle management from Director to VP and GM. This level of management speak in the 100,000 foot view, take little to zero risk and avoid day to day operational responsibility like the plague for fear of bonus impact. Senior management is so detached from daily operations it is not even funny, so get real!

    I witnessed many a VP promote grand ideas such as outsourcing, only to have key details come back and bite the company in the ass. Leaving the worker bees to fight-fire preventable issues while distracting the business of winning business.

    Accountability is completely abscent at Nortel, so long as a good idea looks good on paper while being implemented. The spinner of the idea typically goes off with bonus or options in hand to disrupt another business unit or department, with little or no copability to previous duties.

    Profitable product lines are bled to bolster under-performing product lines purely in the name of intra-business politics and power grabbing. Business units routinely undercut eachother in the name of marketshare rather than colaborative winning strategies.

    Until you've actually worked at Nortel for any length of time, which in its hay-day used to be the funniest company to work at, most of you have zero understanding of what the reality on the ground is all about...

    ...moral is shoot

    ...management is a joke

    ...layoff pkgs are salvation

    I wish all the pundits would look at companies from the zero-foot level instead of trying to be a virtual CEO!
    Reply | Link to Comment
  •  
    Nov 19 12:17 PM
    What really frustrates me is the spineless board of directors at companies like Nortel and across America that write ridiculous senior management hiring contracts without consequence for lower share-holder value. Even more ridiculous is share-holders often vote to approve these illfated hiring agreements, like their visionaries to market success.

    Since when does a corporate executive warrant a severence for failure to execute a successful business plan? If a wanna-bee CxO wants a leadership role in a company, they should be willing to bet their compensation on their personal success in my opinion.

    I hope the day is near when a new crop of senior talent comes into power with integrity of success. Pushing-out and nulifying the existence of the 1990s and 2000 erea executive whose track-record for success is dismal to say the least. I think that would make for interesting cocktail-party gossup, where legacy executives mingle with the new age of responsible management.
    Reply | Link to Comment
  •  
    Nov 19 12:28 PM
    Meanwhile, executive greed continues to plunder Nortel as insiders cash in their early holiday bonuses.

    Really, no kidding! Go look at the ' insiders transactions ' on the Nortel ticker page...

    ... can you believe this group of managers actually believe they deserve a bonus after their 3Q performance and the company just announced salary freezes?

    Hey, I know; lets sink employee moral down a bit farther just in time for another xmas layoff session. Why make the holidays even remotely fun for the have-nots in the company, their lucky to keep their jobs, right?
    Reply | Link to Comment
  •  
    Nov 20 01:04 PM
    The major change Chambers would have brought to Nortel is a cultural one – being marketing. One thing Chamber's knows is that the best technical solution is NOT needed to be the winner.. Just as Ray Norda knew how to propel Novell over the technically superior Banyon. Chamber’s is well aware that while Cisco does not have technically superior gear – he has created the Cisco image - everyone knows the name, students at high schools, colleges and trade schools are being taught the CLI and technology - and created the "no one gets fired choosing Cisco" mantra. John did that while competing with companies offering a more scalable and extensible architecture.

    The fall of Nortel and it’s gene pool (which includes Synoptics, WellFleet and BayNetworks) were all engineering driven companies, all of which have/had the failed philosophy that the best technical solution wins..
    While I agree with many comments of what changes are needed inside Nortel –I believe Chamber's biggest challenge and ultimate victory would happen by making Nortel in to a Marketing company... creating a culture where customer requirements actually take precedence of some technical Phd buried in the labs and being out of touch with the customer base.. I have two examples – 1. Wellfleet routers while technically superior to Cisco did not have a CLI – the techs rebelled and always purchased Cisco. 2. Synoptics tech founder was bent on ATM and refused the sales departments (screaming) requests to put an FDDI connector on a 10mbit enet swich – all because ATM was the technical direction of the day --- Two classic examples where technology was allowed by CEO to ignore the market…. Chambers would not have made that fatal mistake..
    Reply | Link to Comment
  •  
    Nov 21 09:37 PM
    I completely agree with your assessment regarding Nortel's fundemental lack of marketing expertise. I remember the hard time a certain CMO [from Apply] had changing hearts and minds at Nortel with respect to real marketing tactics. In the end, he just got the good o'le Nortel nodd for his efforts. A true waste of proven talent and a major waste of opportunity.

    However, I would argue that marketing all be it in a minor part of the company at the time was alive and well in the Enterprise Business Networks leadship category. Classic examples of Meridian Mail customer partnering did a fair job of implementing customer driven features, and eventually leading to the only unified messaging application with a separate voice/fax message store from email. Which was later copied by Avaya and Cisco, long after Nortel dominated marketshare. Even the SL-1, Meridian 1 and CS 1000 was largely customer driven on the feature side of product development. Still, too much of marketing was spees and fees driven in the end.


    On Nov 20 01:04 PM Keldogs wrote:

    > The major change Chambers would have brought to Nortel is a cultural
    > one – being marketing. One thing Chamber's knows is that the best
    > technical solution is NOT needed to be the winner.. Just as Ray Norda
    > knew how to propel Novell over the technically superior Banyon. Chamber’s
    > is well aware that while Cisco does not have technically superior
    > gear – he has created the Cisco image - everyone knows the name,
    > students at high schools, colleges and trade schools are being taught
    > the CLI and technology - and created the "no one gets fired choosing
    > Cisco" mantra. John did that while competing with companies offering
    > a more scalable and extensible architecture.
    >
    > The fall of Nortel and it’s gene pool (which includes Synoptics,
    > WellFleet and BayNetworks) were all engineering driven companies,
    > all of which have/had the failed philosophy that the best technical
    > solution wins..
    > While I agree with many comments of what changes are needed inside
    > Nortel –I believe Chamber's biggest challenge and ultimate victory
    > would happen by making Nortel in to a Marketing company... creating
    > a culture where customer requirements actually take precedence of
    > some technical Phd buried in the labs and being out of touch with
    > the customer base.. I have two examples – 1. Wellfleet routers while
    > technically superior to Cisco did not have a CLI – the techs rebelled
    > and always purchased Cisco. 2. Synoptics tech founder was bent on
    > ATM and refused the sales departments (screaming) requests to put
    > an FDDI connector on a 10mbit enet swich – all because ATM was the
    > technical direction of the day --- Two classic examples where technology
    > was allowed by CEO to ignore the market…. Chambers would not have
    > made that fatal mistake..
    Reply | Link to Comment
  •  
    Nov 25 08:10 PM
    NT has lost $8 billion of market cap in the last 12 months, while CSCO has lost $80 billion...
    Reply | Link to Comment
  •  
    Nov 26 09:53 AM
    Just curious -
    What is the total loss in terms of percentage of Market Cap -- Is it possible the NT lost a bigger percentage of it's total than Cisco?


    On Nov 25 08:10 PM law1985 wrote:

    > NT has lost $8 billion of market cap in the last 12 months, while
    > CSCO has lost $80 billion...
    Reply | Link to Comment
  •  
    Nov 26 10:02 AM
    I assume you and I both spent quite a bit of time empoyeed at Nortel. My comments were mostly based on my days at Synoptics and Bay Networks - and then in the data world of Nortel. Cisco ate our lunch everyday. Had Andy Ludwig (Synoptic CEO) made the call to follow the Field there would have been no need to merge with Wellfleet (which created Bay). Because of Andy's lack of leadership Cisco waltzed into the layer 2 (IP layer) without a fight. From my perspective Nortel has the same lack of market driven products and innovation. Regarding VoIP, Nortel VoIP solutions are losing greenfield opportunities over the past 12 months - Cisco and Avaya are taking all new opportunities - Norel is winning the upgrade/conversion business. That, in my opinion, is the sign of a company that has lost all relevance in the market place e.g. customer mindshare, ability to build interest and commitment at all levels of the customer coporate ladder... That would not happen in a marketing driven culture - and back to the original point (what would Chamber do), John Chambers would never have let that happen..




    On Nov 21 09:37 PM Broken-Parachute wrote:

    > I completely agree with your assessment regarding Nortel's fundemental
    > lack of marketing expertise. I remember the hard time a certain CMO
    > [from Apply] had changing hearts and minds at Nortel with respect
    > to real marketing tactics. In the end, he just got the good o'le
    > Nortel nodd for his efforts. A true waste of proven talent and a
    > major waste of opportunity.
    >
    > However, I would argue that marketing all be it in a minor part of
    > the company at the time was alive and well in the Enterprise Business
    > Networks leadship category. Classic examples of Meridian Mail customer
    > partnering did a fair job of implementing customer driven features,
    > and eventually leading to the only unified messaging application
    > with a separate voice/fax message store from email. Which was later
    > copied by Avaya and Cisco, long after Nortel dominated marketshare.
    > Even the SL-1, Meridian 1 and CS 1000 was largely customer driven
    > on the feature side of product development. Still, too much of marketing
    > was spees and fees driven in the end.
    Reply | Link to Comment
  •  
    Dec 02 12:10 PM
    Considering Cisco has 70 - 80% of marketshare vs. Nortel in the single to low double digits. The net loss of Nortel's marketshare is far more substantial to Cisco's loss of marketshare, in terms of strategic brand importance in the hearts and minds of IT professionals.

    Long after this economic crisis is over. The global community will still be saying I want to buy a 'Cisco' [Router], as they do in Latin America. Little if anyone says I want to buy a 'Nortel' when it comes to brand recognition, unless it is practically given away.

    The true test of a brand is its ability to retain value, which ultimately leads to the purist form of marketshare...

    my 2 cents.


    On Nov 26 09:53 AM Keldogs wrote:

    > Just curious -
    > What is the total loss in terms of percentage of Market Cap -- Is
    > it possible the NT lost a bigger percentage of it's total than Cisco?
    >
    Reply | Link to Comment
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