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

To: tom pope who wrote (14530)	9/21/2006 6:54:45 PM
From: waitwatchwander	Read Replies (1) \| Respond to of 14638

Taking about fatique ... The Traveled Road ... theglobeandmail.com Plans for acquisitions on hold at Nortel CATHERINE MCLEAN Globe and Mail Update Nortel Networks Corp. should focus on its corporate cleanup, rather than participating in the wave of consolidation sweeping the industry, chief executive officer Mike Zafirovski says. The communications equipment maker undoubtedly has a full plate. Since taking the helm last November, Mr. Zafirovski has crafted the latest in a series of makeover plans for the long-struggling company. Its highlights include slashing costs, settling investor lawsuits, and selling assets in markets where Nortel can't be a leader. But the industry isn't standing still while Nortel sorts out its business affairs. Some rivals have recently hooked up to create industry giants, and Mr. Zafirovski concedes Nortel also needs to bulk up in some product areas. Acquisitions, however, are on the back burner for now. “We have more important things to do in 2006,” Mr. Zafirovski said in a telephone interview Thursday. Nortel will “focus on what we can do internally — strategically and operationally — and really to push out external activities to some time in 2007.” The highly regarded former Motorola Inc. executive cites a number of activities that are keeping Nortel busy. The company has refreshed its management ranks with outside talent, reached settlements in major shareholder lawsuits, and sold off non-core assets. It's also laying the groundwork for a program to boost operating margins in coming years through savings in direct materials and research and development. “I really believe it's a very different company,” he said. However, he's also had to cope with distractions this year. Nortel unexpectedly had to restate financial results for the third time since 2003. And the company stood on the sidelines and watched as Alcatel SA scooped up Lucent Technologies Inc., and Nokia Corp. and Siemens AG's merged their telecom gear businesses. Investors appear to have some concerns about where the company is headed. Nortel's stock has dipped 26 per cent this year. Some analysts say the Brampton, Ont.-based company must make greater headway with its restructuring plans. Others believe Nortel needs a more detailed vision beyond a general focus on services and next-generation mobility and enterprise networks, areas where it must face off against bigger players such as Ericsson Inc. and Cisco Systems Inc. Mr. Zafirovski clearly knows there is more work to do, and has warned a turnaround will take years. Nortel's operating margin, for example, fell in the second quarter amid pricing pressure. It's a trend he needs to reverse. “I do not want to give the impression we're happy with our current performance or the current level of penetration in business activities where we are focusing on at this point in time,” Mr. Zafirovski explained. One key part of Mr. Zafirovski's strategy is to stay in businesses where it can achieve 20-per-cent market share, and sell the rest. Nortel announced a number of divestments this year, including the recent sale of a wireless access business to Alcatel. The divested assets account for about 20 per cent of Nortel's R&D budget, an area where it aims to get more bang for its buck. Some of those R&D dollars are reinvested into new areas that are underfunded, such as a wireless Internet technology called WiMax and IMS (Internet Protocol Multimedia Subsystem) gear that lets phone and TV services work across different networks. Nortel has sold many of the businesses that needed to go, Mr. Zafirovski said. Still, he's not ruling out future selloffs. “I understand that nobody guarantees you success,” he explained. “There are very aggressive objectives. If we're not successful, you say, do I keep investing in this activity or not? The answer could very definitely be no.” Nortel has had less of a presence on the acquisition trail. Its biggest deal under Mr. Zafirovski was last December, when it purchased a router company. Acquisitions could come in handy as Nortel seeks to expand some of its core product areas, which include services, telecom equipment for companies, metro Ethernet, WiMax and CDMA wireless technology, Mr. Zafirovski acknowledged. However, he wouldn't comment on possible targets, including recent speculation that it might snap up San Jose, Calif.-based Force10 Networks Inc., which makes Ethernet switches. Concern about shifting Nortel's focus away from its reorganization isn't the only reason Mr. Zafirovski is hesitant when it comes to acquisitions. The company also needs to improve its financial situation before it can go shopping. “We're very cognizant of the stock price and our cash situation,” he said. “As we get more comfortable, then the financial situation will start improving ..... [and] our ability to do acquisitions will improve. “We will not be an island on our own,” he added later.