Nortel replaces Enterprise chief

Nortel replaces Enterprise chief

Surprise move comes while unit experiences growth

In a surprise move, Nortel this week replaced its Enterprise Solutions chief, even though the unit is growing at about three times the market.

Nortel named Joel Hackney, until now its senior vice president of Global Operations and Quality, as president of Enterprise Solutions, effective immediately. Hackney replaces Steve Slattery, a 20-year Nortel veteran, who is leaving the company Oct. 1.

Slattery just last week laid out an aggressive product plan for Nortel going into 2008.

The move comes at a curious time. Nortel's Enterprise Solutions group enjoyed 23% growth in the second quarter while the industry as a whole grew 7% to 8%, the company says. It was the fourth consecutive quarter of year-over-year growth for the group. Nortel also gained some recognition in unified communications this week from Gartner, which placed the company in the "leadership" segment of its marketing-coveted "Magic Quadrant" industry assessment gauge, moving ahead of Cisco and Avaya.

Despite these positive trends, Nortel said the switch reflects the company's stated objective of accelerating momentum in its Enterprise business. "Joel Hackney is a high-energy, results-oriented leader with a proven track record of leading and growing businesses," said Nortel CEO Mike Zafirovski, in a statement. "He is widely recognized for operational excellence and speed of execution. Joel is absolutely the right person to further accelerate the momentum in Nortel's Enterprise business that will be noticeable to customers, channel partners -- and our competition."

Like Zafirovski, Hackney had a long tenure at General Electric. The move is another indication that Zafirovski wants to surround himself with GE people heading up key areas for the company. Indeed, Hackney's replacement as senior vice president for Global Operations is another ex-GE veteran, Joe Flanagan. Flanagan was previously vice president for Global Fulfillment.

Even though Enterprise was experiencing top line growth, some analysts speculated the switch was made to accelerate the bottom line and perhaps Nortel's M&A activity. "Nortel's Enterprise unit delivered solid, top-line results in recent quarters, yet it's unclear how much progress was made on profitability," stated CIBC World Markets analyst Ittai Kidron in a report on the changeover. "We suspect that Mr. Hackney, who has been leading Nortel's business transformation cost-cutting initiatives, would focus on this point and accelerate execution."

"The Enterprise unit has material gaps in its product portfolio, and based on our recent call with Mr. Slattery, it was our impression that acquisitions are less likely and internal development more likely," Kidron added. "With a new, cost-focused chief, we believe this approach could be revisited."

Nortel M&A activity has been the source of much recent speculation. 3Com, Foundry Networks and F5 Networks have been mentioned as potential targets, and Slattery last week said Nortel has spent the past 18 months sizing up opportunities.

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