former president, COO, Nortel Networks

Just three months after joining Nortel Networks as president and chief operating officer, Gary Daichendt is resigning. The situation puts another big question mark on the network gear-maker’s future, according to one IT industry observer.

On June 10, Nortel announced that Daichendt had filed his resignation. A statement from company CEO Bill Owens suggests dissention among the firm’s C-suite. “It has become apparent to Gary and me…that we have divergent management styles and our business views differ,” Owens said.

While making the decision to leave Nortel was a difficult one, my time with the company has confirmed that Nortel has world class technology and people.Gary Daichendt>Text

Nortel hired Daichendt, a former Cisco Systems Inc. executive, in March. George Goodall, an IT industry analyst at Info-Tech Research Group in London, Ont., said Daichendt’s decision to leave enforces “the big question mark over the product roadmap….What is the future of this company?”

He noted that Nortel’s past financial problems, ongoing competitive pressures and now this management amendment might make some wonder whether it’s worthwhile renewing their licences for Nortel equipment.

“The technology is good,” Goodall said of Nortel’s wares, “but a lot of other competitors have good technology.” New network entrants offering voice over IP (VoIP) equipment — one of the hottest technologies on the market these days — combine with management issues and a shaky fiscal history to affect Nortel’s prospects, he said.

Roberta Fox, senior partner of Fox Group Consulting in Markham, Ont., said Nortel’s been hiring former Cisco execs lately in an apparent effort to boost sales and marketing. Although she figured it was a smart move, she also worried about how well the Cisco folks would fit into the Nortel mileux.

“The cultures are very different,” Fox said. “Cisco is much more focused on being a sales and marketing machine. Nortel is focused on being an engineering machine.”

She pointed out that Nortel “has good cash reserves and financially a good base to work from,” but the management shuffle means the company is “just going to be distracted again.” It takes effort to integrate new execs, fill holes in the C-level lineup — effort that Nortel might otherwise spend developing new products and markets. “Meanwhile the competition is focused and moving forward,” Fox added.

In a Nortel statement, Owens said his Brampton, Ont.-based company “will continue to focus on operational excellence as a broad-based carrier and enterprise networking company.”

The statement also mentioned that Gary Kunis, Nortel’s CTO, is leaving. Another ex-Cisco exec, Kunis came aboard the Nortel ship when Daichendt did.

Accounting problems at Nortel first came to light in late 2003 when the company announced that it would restate financial results for 2000, 2001, 2002 and the first two quarters of 2003 as part of an ongoing review of its assets and liabilities, following revelations that its past accounting had been manipulated. After some delays Nortel announced the 2003 numbers earlier this year: a 40 per cent reduction compared to the original 2003 financial filings. Nortel still managed to turn a profit, however, despite the reduction. The firm presented a US$434 million profit. Originally Nortel said it made US$732 million in 2003.

— With files from Allison Taylor and Michael Martin

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