Dying Nortel's CEO steps down, board trimmed

The final curtain fell on dying Nortel Monday when its president and CEO Mike Zafirovski stepped down even as the company trimmed its board of directors from nine to three.

In another announcement, the 124-year-old Canadian tech giant reported a 25 percent fall in its second-quarter revenue from the same period last year, doubling its losses to $274 million.

After suffering losses of $5 billion last year and then undergoing bankruptcy protection in Canada and the US in January, Toronto-based Nortel announced last month to wind itself up by selling its various businesses to pay off creditors. It sold its next-generation wireless business to Ericsson for $1.13 billion in a court-supervised auction in New York last month - a move contested by BlackBerry maker as against "national interest".

Zafirovski, who took over as CEO in 2005 after an accounting scandal, said: "I am extremely proud to have been associated with this company.

"The board members and I came to Nortel because we really believed in the value of Nortel's people and technology. Although solid progress was made in many areas, at the end, the capital structure and legacy costs coupled with the economic downturn proved too difficult to surmount."

Zafirovski, an American who joined Nortel from Motorola, said: "We have taken many steps. We have completed the organizational moves of Nortel's businesses to vertically integrated, stand-alone business units, and on June 19th, we announced that we would work to maximize value through the sale of these businesses."

The dying Nortel will now have a three-member board comprising John A. MacNaughton, Jalynn H. Bennett and David Richardson, with Richardson serving as the new chairman.

Outgoing chairman Harry Pearce said: "We have reached a logical departure point. Mike (the outgoing CEO) made a commitment to see the process through the stabilization of the company, sale of its largest assets and the right plans and people to continue operating our business and serving customers. He has done so."

A Canadian corporate giant, Nortel accounted for almost one third of the total valuation of all the companies listed on the Toronto Stock Exchange (TSX) till the dotcom bust of 2000 did it in. Its market capitalization plummeted from almost $400 billion just before the dotcom bust in September 2000 to $5 billion within two years as its stock sank from $124 to $0.47.

Then came the accounting scandal of 2004 which left its reputation in tatters. In 2006, the telecom giant had to shell out $2.5 billion to settle shareholder class actions.

When the global economic crisis hit last year, Nortel was already in very bad financial shape. As markets shrank and credit avenues dried up, the company sank deeper.

Bankruptcy protection was its last option to survive, but it too failed to save it.