Nortel names Mike Zafirovski as CEO, president

TORONTO (Reuters) - Nortel Networks on Monday named former Motorola number two Mike Zafirovski as president and chief executive to replace Bill Owens at one of the world's largest makers of telecoms equipment in a surprise move that was cheered by analysts.

Zafirovski, 51, who was president and chief operating officer of Motorola from 2002 until January, was credited with turning around the number three maker of mobile handsets' mainstay business. He will take over from Owens on 15 November.

"It's a pleasant surprise," said RBC Capital Markets analyst Mark Sue. "It's positive for the company. Mike was instrumental as a turnaround player at Motorola. This is what Nortel really needed."

Owens, 65, took over the helm of Nortel more than a year ago, as the company emerged from an accounting scandal that bruised its reputation, felled its share price and forced it to sack several top executives, including former CEO Frank Dunn.

Analysts praised Owens, previously the second-highest ranking military officer in the United States, for his steady leadership as Nortel worked to correct several years of financial results that were later shown to have been manipulated to trigger bonus payments.

"The past CEO deserves a lot of credit for stepping into a difficult role," said CIBC World Markets analyst Steve Kamman. "The simple fact is that Nortel needs a house cleaning and it needs more focus. And from all reports, Mike is the kind of guy to do all of those."

Nortel finally brought its reporting up to date in May, but analysts are unhappy that the company has since dithered on strategy in a fast-changing and competitive environment.

"Bill was a safe pair of hands, but when it came to dealing with a dynamic market and a bruised company, I think there is just a little bit of lost momentum," Kamman said. "He is doing the right thing by stepping down. A lot of lesser men might not have been willing to step down."

Owens said he was "pleased to turn over this company to a proven leader to drive our success over many years ahead."

His departure follows the high-profile resignations in June of chief operating officer Gary Daichendt and chief technology officer Gary Kunis, after a clash with Owens.

While Nortel is now on steadier ground, Zafirovski, who resigned from Motorola after being passed over for the chief executive post, still faces a daunting task in his new job.

"It's not all systems go, beyond the funny accounting," Kamman said. "The most important thing with a CEO is a willingness to stand up and say we have some problems that need to be fixed."

Those problems, he said, include too little research and development stretched over too many markets, a management team that has not been revamped sufficiently since Dunn's departure and a lack of transparency despite promises made by Owens.

"This guy can come in, slay some sacred cows, take a clean slate and hopefully move the company forward," said Kamman.

Nortel has struggled to recapture the glory that had once made it the market darling. Its shares had peaked at C$124.50 in 2000, only to crash to as low as 67 Canadian cents in 2002.

Nortel said in a statement that Owens will "continue his engagements around the world in serving on various boards, in promoting good governance".

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