Nortel plans to drop or spin-off more products

New CEO says the company hit 20% market share or hit the road.

Nortel Networks will closely examine all of its product categories and consider dropping out or seeking a partnership or joint venture anywhere it doesn’t hold (or forecast) a 20% market share, president and chief executive officer Mike Zafirovski says.

As part of a massive renovation of the company he took over late last year, Zafirovski is also signalling changes in the company’s executive ranks and aims to make services and applications a much bigger part of the business.

The communications equipment maker disclosed yet another in a series of financial restatements. Nortel says it will re-state revenue for some periods and defer it to future periods. The Canadian company will disclose more details after the review is finished, it said in a statement to the Ontario Securities Commission.

Nortel, which has gone through financial scandals, in addition to restatements, over the past several years, needs what Zafirovski called “integrity renewal”, along with a return to profitability.

“Nineteen ninety-eight was probably the last year we had a good, balanced financial performance,” Zafirovski says. “We’re too complex to operate as a company ... We’ve tried to be too many things to too many people.”

Nortel wants to hold at least 20% of every product area in which it competes, Zafirovski says.

In areas where that doesn’t look realistic, Nortel will consider partnering with other companies or pulling out.

If results don’t meet goals in a particular geographic area, it may also make changes on a regional basis, he says.

In technology categories that are just emerging, namely IMS (Internet Protocol Multimedia Subsystems) and WiMax wireless broadband technology, Nortel aims to lead the market and will give itself three to five years to achieve that goal, he says.

With the money it would have spent on the categories it drops, Nortel will “double down” on investment in areas it sees as more critical to its business.

The company has already made some of these calls, Zafirovski says. In February, it spun off its blade-server switch business to a new company called Blade Network Technologies.

Zafirovski doesn’t expect the planned merger of Lucent Technologies and Alcatel to change Nortel’s competitive situation significantly. Cisco Systems is Nortel’s biggest competitor overall, followed by Ericsson in the mobile arena.

Alcatel is a threat in a few places in the wireline area, primarily in IPTV (Internet Protocol TV) through its partnership with Microsoft, he says.

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