Tom,
A few more details. Perhaps we will know the whole story eventually...
Ian
+++++++++++++++++++
The story behind the Nortel divorce
GORDON PITTS
00:00 EDT Monday, June 20, 2005
About three weeks ago, the new president and chief operating officer of Nortel Networks Corp., Gary Daichendt, dropped a bombshell on the board.
He proposed an accelerated plan to overhaul Nortel's product strategy -- and he would be in charge of driving that change.
It was seen as a direct challenge to the vision of CEO Bill Owens, the retired U.S. admiral who had taken command in early 2004, when Nortel was reeling from the ouster of its previous chief executive.
But on June 10, Mr. Daichendt was gone after just three months at Nortel, having played his hand and lost.
"It is awfully difficult for a board to go along with a three-month-hire COO versus a CEO who stepped into the breach after two years on the board," says an executive who is close to the Nortel board.
In a struggle between two Americans over a new vision for the troubled Canadian telecom icon, the Nortel board backed Mr. Owens, 65, who is also its vice-chairman.
That left Mr. Daichendt, a 53-year-old former Cisco Systems Inc. executive, with no option but to leave. Having come to Nortel with expectations to be CEO, he learned that wasn't in the cards right away, and he didn't want to wait.
This chronology has been pieced together from interviews with analysts and observers, and with a number of people with ties to Nortel.
Mr. Daichendt, who has a real estate business in Huntingdon Beach, Calif., did not respond to requests for an interview.
The departure of Mr. Daichendt, along with his former Cisco colleague, chief technology officer Gary Kunis, has dealt a new blow to Nortel's recovery from a barrage of accounting, governance and financial blows, including a constant turnover in the ranks of top executives.
It also raises questions about how Mr. Owens sees his future. Outside observers say he is a transitional CEO, who moved from a director's role to the top executive job at the darkest hour -- when former CEO Frank Dunn left amid allegations of accounting malfeasance at the company. But Mr. Owens has been vague about the length of his tenure.
His ability to fight off Mr. Daichendt's challenge suggests he retains considerable authority on the board, which feels indebted to him for coming to Nortel's aid.
Mr. Daichendt's exit also raises the expectation that when Mr. Owens does leave, his replacement will be Peter Currie, who returned to Nortel as chief financial officer just before Mr. Daichendt was hired.
Mr. Currie is entering his third go-round with the telecommunications company, having left most recently in 1997 to serve as Royal Bank of Canada CFO. His return is seen as a psychological boost, assuring employees, suppliers and customers that Nortel has a future. He was appointed executive vice-president at the same time Mr. Daichendt joined the company.
Mr. Daichendt's résumé seemed equally suited for a future CEO of Nortel, a company that had fallen on hard times after riding the telecom bubble of the late nineties.
Brought to Nortel's attention by a headhunter, he's an industry veteran who in the 1990s became a top executive for San Jose, Calif.-based Cisco, whose aggressive sales approach contrasts sharply with the Canadian company's more relaxed culture.
But in fact, Mr. Daichendt had been out of the industry for five years when he joined Nortel. He had quit Cisco in 2000 to spend more time with his family and personal business, which includes Theory R Properties, a real estate company in Huntingdon Beach.
Theory R stands for Theory Right which means operating with integrity and fairness to all parties in a transaction, said Joe Daichendt, Gary's son, who has been running the company in his father's absence.
That emphasis appealed to Mr. Owens, who in addition to financial challenges is coping with the ethical deficit left by his predecessors.
But the two men are a study in contrast. Gary Daichendt, a devout Christian who is a compelling public speaker, has an evangelical drive that shows through in his religious and sales activities.
He told a 2001 meeting of a Silicon Valley Christian fellowship group that he became seriously committed to his religious calling at age 33. "I have a passion -- to step out and take action for Christ," he said. He is also highly entrepreneurial, coming out of Cisco's growth ethic of the mid-1990s.
Mr. Owens, meanwhile, is a career naval officer who rose to vice-chairman of the U.S. Joint Chiefs of Staff, making him the second-ranked U.S. military officer. His background suggests a military-style commitment to hierarchy and proper channels.
The day Mr. Daichendt's appointment was announced, he violated that decorum. He told a wire service that he expected to be the next chief executive officer of Nortel. Mr. Owens responded that he would be surprised if Mr. Daichendt did not aspire to be CEO, but that he had no immediate plans to leave.
Inside Nortel, the new president's comment was considered serious overreaching.
It also underlined that an executive recruit's compatibility with the existing team is unpredictable until the new person actually joins the company. The prehiring interviews with Mr. Daichendt did not reveal his personal agenda, company sources say.
The executive with ties to the Nortel board said Mr. Daichendt's strong personality immediately clashed with the restrained Mr. Owens. In his press release, Mr. Owens said there were differences in management style.
"I have to tell you, the guy [Mr. Daichendt] was not shy," the executive said. "The press release pretty much summed it up. The two didn't get along."
Mr. Daichendt then presented his change agenda, recommending increased emphasis on certain product areas. It was not radically different from Mr. Owens' strategic plan of last August when he took aim at the large-company and government markets. But under Mr. Daichendt, changes would have come more quickly.
In Nortel, there is a concern that customers, already buffeted by the company's recent history, needed a period of stability in relationships with their supplier.
In the end, the board rejected the accelerated strategy, and decided Mr. Daichendt would not get the CEO's job right away.
The view inside Nortel is that while the Daichendt-Kunis departure seems serious from the outside, it is not a crippling blow. It is far better that Mr. Daichendt's agenda surfaced in the early stages of his Nortel tenure, rather than in another six or nine months.
Even so, turnaround experts wonder about a recruiting process that would allow such a gap between the company's plans and the new recruit's expectations.
"There clearly was a disconnect here," said corporate turnaround specialist William Aziz, who is now the chief restructuring officer at SR Telecom Inc. of Montreal.
Corporate clash
Former Nortel president Gary Daichendt's strong personality was said to have immediately clashed with the more restrained nature of chief executive officer Bill Owens.
Gary Daichendt
Age: 53
Role at Nortel: Mr. Daichendt was appointed president and chief operating officer in March. He resigned the position in early June after the company's board rejected a radical restructuring plan he proposed.
Bio: A Christian who is a compelling speaker, he has a strong evangelical drive that shows through his religious and sales activities. He is also highly entrepreneurial, coming out of Cisco System Inc.'s growth ethic of the mid-nineties.
Bill Owens
Age: 65
Role at Nortel: Mr. Owens became chief executive officer of Nortel in April, 2004, as a deepening accounting scandal cost former CEO Frank Dunn his job.
Bio: A career naval officer who rose to vice-chairman of the U.S. Joint Chiefs of Staff, making him the second-ranked military officer. His background suggests a commitment to hierarchy and formality. |
