Motorola and Nortel settle

A ban on poaching Motorola employees is one of the conditions of a settlement between Nortel and Motorola over Nortel's hiring of ex-Motorola exec Mike Zafirovski

Nortel Networks has agreed to pay US$11.5 million (NZ$16.5 million) as part of a legal settlement with Motorola over its hiring of Mike Zafirovski, formerly Motorola’s president and chief operating officer, as Nortel’s new chief executive.

Motorola launched the lawsuit earlier this month, just days after Nortel announced it had picked Zafirovski to be its new chief executive. Citing non-compete agreements, Motorola sought to prevent Zafirovski from working at Nortel for two years and to block him from poaching Motorola employees to work at Nortel.

Under the terms of the settlement, announced last week, Zafirovski and Nortel have agreed not to recruit Motorola employees and to limit Zafirovski’s communications with certain unnamed companies, some of which are Motorola customers. The settlement also limits Zafirovski’s ability to advise Nortel “on competitive strategy or analysis relative to Motorola”, Nortel said in a statement.

Zafirovski must also repay Motorola US$11.5 million in separation money it gave him when he left Motorola earlier this year. Nortel says it will reimburse Zafirovski for this payment.

Zafirovski’s total payout when he left Motorola was US$17 million, but Motorola only claimed US$11.5 million back.

The settlement clears the way for Zafirovski to succeed Nortel President and CEO Bill Owens, a transition that is scheduled to occur on November 15. Zafirovski will be taking over a company that has been rocked by a downturn in the telecommunications equipment market and a financial scandal that led to the firing of a number of Nortel’s top executives, including former CEO Frank Dunn.

Motorola’s original court proceedings stated “Despite being paid millions of dollars in cash, stock and stock options in exchange for Zafirovski’s simple agreement not to take a position with a competitor for two years ... Zafirovski wilfully and deliberately violated the reasonable non-compete agreements”.

Nortel wasn’t named as a defendant in the filings, but the two companies held discussions with a view to settling as the proceedings were filed.

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