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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Cooters who wrote (13910)	6/10/2004 9:26:09 AM
From: esxtarus	Respond to of 14638

Story about CEO Owens SUBJECT: Nortel's Straight Arro "Market Trends" by Larry MacDonald What to make of the appointment of retired U.S. admiral William Owens as chief executive at Nortel Networks Corp.? That's a frequently asked question these days. It's not the first time a naval man has been at the top. Nortel's boss from 1895 to 1913 was C.F. Sise, a ship captain. Sise was not one for pleasantries. With ramrod-straight posture and large bushy mustache, it was said "one glance from his ice-blue eyes would send employees looking for a quarterdeck to swab." (Quote taken from my book on Nortel. See below.) But Owens is not the austere, martinet type. Although this former submarine captain, commander of the U.S. Sixth Fleet, and vice-chairman of the Joint Chiefs of Staff is comfortable with the mantle of command, he's not one to bluster and thump the table. As befits our kinder and gentler era, Owens is more the cerebral, articulate type of military leader. "He runs over you with kindness and gobbledygook," said a general who had dealings with him during his stint as the U.S. navy's principal long-term planner. Owens joined Nortel's board in early 2002. That appointment probably came about from his mission to upgrade the U.S. military with new technologies, which put him in contact with executives at technology companies such as Nortel. Not much is known about his contribution to Nortel as a director. It may not have been all that significant. He had about half a dozen other directorships and was perhaps spread too thin. So why would Owens be appointed the lead person? Part of it seems to be the old Nortel formula of getting a CEO whose qualifications include high-level connections in U.S. business and political circles. Like Edmund Fitzgerald from 1982 to 1989 and Paul Stern from 1989 to 1993, Owens is someone who can open doors in the corridors of the Fortune 500 and on Capital Hill. He has the profile and the contacts to smooth the way to some big equipment orders, as well as to represent Nortel's interests in the political realm. Furthermore, he believes that the U.S. military needs to deploy more advanced technologies, particularly in the communications area. This is Nortel's niche, especially when reliability requirements are high. With Owens' influence, Nortel could find new business as a major supplier to the U.S. military. Not to be overlooked are his business contacts. As mentioned, he was on the board of several U.S. companies, many of which were technology companies. Owens' directorship at Polycom Inc. is particularly interesting. Polycom at the forefront of developing teleconferencing over Internet Protocol (ToIP), potentially a big market for Nortel down the road. Another likely reason for Owens' appointment is his reputation for being a straight arrow. The accounting scandal has shaken confidence in Nortel, and a leader beyond reproach is needed to restore credibility. Owens doesn't fit the stereotype of a greedy executive who sees a company as a cash cow with bonuses and stocks options to milk. For example, when there was substantial buying by insiders of Nortel shares in 2002, Owens was one of the few directors to abstain. The directors who bought shares made fortunes in the subsequent rally. Leading the way was chairman Lynton (Red) Wilson. His holdings appreciated by several million dollars. But it has now come to light that the rally was helped along by some accounting artistry from former CEO Frank Dunn. And he, in turn, was "incentivized" by a bonus scheme sanctioned by the board of directors. Now, to have endorsed a bonus plan that could be triggered by accounting tricks raises questions about the motives of the directors. Such a flagrant oversight would seem to be hard to defend, especially when the guilty parties so obviously benefited. An exception would be the directors, like Owens, who did not buy shares. They had no pecuniary motive. So if they did vote for the incentive package, it could be said to be an unintentional error. This may not reflect well on their judgement, but it does leave their integrity in tact. If worse comes to worse when ongoing investigations report their findings on Nortel, Owens is one of the few Nortel insiders who would likely emerge with their ethics untarnished. And that is the kind of leader Nortel needs at this stage. No more John Roth casting frequent glances at Nortel's stock price on his computer screen. No more Jean Monty, who in an era less hostile to accounting shenanigans, could get away with "cookie jar reserves". And no more Paul Stern, who couldn't find a way to fix bugs in Nortel's digital switches without interrupting earnings growth and, incidentally, his bonuses. Perhaps a new chapter is about to be written in the Nortel story. Instead of a period when executive self-interest and short-term performance may have got too much weight, the company now seems to have an executive open to a new balance between executive and company interest, between short- and long-term corporate results. June 3, 2004 NewsBlast Sign-Up StockHouse NewsBlast: Receive company sponsored news and information via email. « Previous Message Next Message » BullBoards users meet the InvestorMarketPlace...the other integral tool for the smart investor. Click here now. 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