June 10, 2005

Nortel: The Real Story (I Think)

Here's what I think really went down at Nortel this week that caused COO Gary Daichendt and CTO Gary Kunis to quit. Both ex-Cisco executives, who are both ultra-wealthy, came out of semi-retirement to take on the challenge of turning around Nortel. They were given assurances that, if needed, radical surgery could be performed to bring Nortel back to health – even if it meant doing a major overhaul. Daichendt, a well-respected person of deep personal faith, had to be given assurances he would take over as CEO from 65-year-old Bill Owens in the not-too-distant future. So after three months on a global tour, Daichendt and Kunis present their restructuring plan to the board, a 13-member group of which five are not seeking re-election at Nortel's AGM later this month. Remember, this is pretty much the same group that approved the compensation scheme that caused Nortel to find itself embroiled in an embarassing accounting scandal. Anyway, the board rejects the restructuring plan as too radical – probably because it meant selling half of the wireless business (the GSM and UMTS parts) and most of the optical unit. Meanwhile, Daichendt realizes his chances of becoming CEO are becoming a long-term proposition given public statements by Owens recently that he's healthy,vital and no longer auditioning for the job. Daichendt saw the writing on the wall both strategically and professionally, and decided it made more sense to go back to his family-owned real estate business in California. It probably took Kunis about a second to pull the chute as well. It's a sad state of affairs when two seasoned telecom executives head off into the sunset while an ex-military man is left running the ship, and now has to recruit new blood into the senior ranks.

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