Nortel's enterprise network ambitions suffered a setback last week as two top officials - both former Cisco executives - departed after just three months on the job.
President and COO Gary Daichendt, formerly executive vice president of worldwide operations at Cisco, resigned due to management differences with Nortel CEO Bill Owens. CTO Gary Kunis, who had been Cisco's chief science officer and worked alongside Daichendt at Cisco, followed his colleague out the door.
"It has become apparent to Gary and me . . . that we have divergent management styles and our business views differ," Owens said in a statement. "I respect him for his decision and I wish him every success in his future endeavors."
Owens, during an interview earlier in the week with Network World, never indicated any such problems were afoot when questioned about the recent hirings.
The hirings of Daichendt and Kunis were considered coups in light of Nortel's strategy over the past year to give enterprise networking more prominence within the organization. The company has been relying increasingly on its enterprise network operations to drive revenue growth and help put behind it an accounting scandal that forced the restatement of years of results.
But Nortel has lots of work to do in the enterprise market. A distant No. 2 to Cisco in the Layers 2, 3 and 4-7 switched Ethernet market, Nortel lost a full percentage point of revenue share in 2004 and even more share between the fourth quarter of 2004 and the first quarter of 2005, according to Dell'Oro Group.
Owens will now take back the reins he handed to Daichendt when he hired him. But analysts say Owens best not hold them too long or too tight.
"It's a blow to their enterprise play," says Zeus Kerravala of The Yankee Group. "In a sense they're starting back at square one. The fact that it happened this quickly makes you wonder about the culture there.
"He's got to hire two more executives. He's got to bring in some tactical people, Kerravala says. "He can build and set the vision for the company but he's got to have some guys in there that make the day-to-day operations run."
Nikos Theodosopoulos of UBS Warburg asked: "Why were these guys hired in the first place?
"It's definitely a setback," he says. "The company just made an acquisition [of government integrator PEC Solutions] and you've got to deal now with integration of that. And now you have no COO. It puts some strain on the integration process of PEC."