What Mike Zafirovski said to Nortel employees

 A trusted CDN source sent me a correspondence from Mike Zafirovski, CEO of Nortel Networks. The email was sent to All Nortel Employees on Friday, June 19, 2009 at approximately 8:36 P.M.

Most Nortel employees looked at this note this past Monday, after the Father’s Day weekend.

Zafirovski’smessage, which you can read in its entirety, speaks about the NokiaSiemens deal and the road head. One of the more interesting passages ishow he describes the effort put forth to save the company and tocontinue “writing the history of this storied company.” But in the end,the stalking horse deal was the “best path” for customers, employees,creditors, Nortel pensioners and to preserve Nortel innovation.

This statement will be debated on for many years.

Enoughof my thoughts here are Mike Zafirovski’s. Oh, after the Nortel CEO’smessage to employees look for two quick hits that are local to theToronto channel.






Team Nortel:


Ithas been a long journey since our January 14 announcement. Nortel hasbeen battling against a tough marketplace and the effects of ourfilings for creditor protection. I want to thank you for your effortsto stabilize our business, preserve our customer relationships and facethe task at hand with both a sense of reality and optimism. You havedriven hard and with a sense of urgency to close business and move thiscompany forward under the harshest of circumstances. Your dedicationand hard work have been inspiring.


Today, I want to share some newswith you on Nortel’s and your future, to provide some clarity aroundour decision-making process and what lays ahead. As you know,evaluating our businesses to determine the ultimate path forward hasbeen our most critical priority. On May 11, we said we were working tomaximize the value of the company, while preserving our innovationplatforms and employment to the greatest extent possible. We also saidthat we had been in discussions with external parties around a numberof our businesses. I am pleased to announce that these discussions haveprogressed and that today we:


·        entered into a “stalking horse” sale agreement for our CDMA businessand LTE Access assets with Nokia Siemens Networks for US$650 million.


·         are advancing in discussions with external parties to sell our other businesses.


Iknow you are eager to hear what this means for Nortel, and for you. Youwill be hearing first from your business leaders in greater detail atlive GISs starting on Monday, then I will provide additional commentsin a company-wide video before the week is over. But first, let mebriefly provide some context around how we reached these decisions.


Inearly 2006, we set out on an ambitious path to transform this company –to significantly improve our operations and cost structure, andaggressively shift our economic center and investment bets from legacyto the high-growth segments of the market. You have made tremendousprogress on many fronts – capturing our customers’ appetite forinnovation with cutting-edge technologies like 40Gig/100Gig; LTE, CVASand Unified Communications – transforming our processes and improvingour product quality and customer service levels – while fixing oursignificant accounting and legal issues. Our strategic intent was todrive industry consolidation through organic growth and acquisitions.While we made considerable progress, we could not achieve the financialleverage required to lead this effort, especially with the economicdownturn and credit crisis.


Letme be clear. Together, you have created real value for this company,and today’s news and the ongoing and tangible interest in ourbusinesses and intellectual property by other parties are solid proofpoints. Our priority going forward will be to leverage that interest tomaximize the value you have worked so hard to create. Around that, myfocus continues to be to do everything we can to ensure our customerscontinue to benefit from Nortel innovation and that as many employeesas possible have the best chance to move with our businesses as theypotentially move into other companies.


Best Path Forward for Wireless

Aswe evaluated our businesses it became clear that a sale is the bestpath forward for our Wireless business. This decision allows thisbusiness to preserve the significant value inherent in its know-how andleading-edge technologies and solutions, particularly if it isconsolidated in companies that can bring greater scale to themarketplace.


Youhave built this business into a strong player in the market and avalued asset in the industry. Nortel is the second largest supplier ofCDMA infrastructure in the world – we do business with three of thefive top CDMA operators globally, including Verizon Wireless, whichoperates the largest wireless voice and data network in the UnitedStates. With strong customer relationships globally, you have drivendifferentiation and competitive advantage through deep innovation inthe wireless space.


Atthe same time, the leading innovation and capabilities of our 4Ginnovations have been driving our world toward true mobile broadband.Our LTE capabilities have been well-received by key global carriers andare very complementary to the LTE efforts of Nokia Siemens. Theinclusion of certain of our LTE Access assets means that Nortel-growninnovation will remain at the forefront of the next wave of wirelessnetworks. We should all be proud of the many Nortel employees who havecontributed so much to move 4G forward—their legacy is an important one.


“Stalking Horse” Process


Itis also extremely important to understand the processes around thewireless sale agreements. In the U.S., this sale requires acourt-approved bidding process, known as a “stalking horse” or 363 Saleunder Chapter 11 of the U.S. Bankruptcy Code. Consummation of the“stalking horse” transaction is subject to higher or otherwise betteroffers.


This“stalking horse” process is controlled and prescribed through thecourts and we must ensure it is a fair and open one. You will see verylimited discussion around what a combined business would look like aswe cannot favor the “stalking horse” purchaser over another potentialbidder. There will be no business or portfolio integration taking placeuntil the process has been completed and definitive purchase agreementsare in place. During this time, employees must remember that theyshould continue their ongoing duty to act in the best interest ofNortel and not any potential purchaser.


Inaddition to the auction process and Ontario Superior Court and U.S.Bankruptcy Court approvals, the agreements are subject to othercustomary approvals, including government approvals such as in Canadaand the U.S.


Advanced discussions to sell our other businesses

Sincethe beginning of the filing process, our focus has been on preservingthe value of our businesses – our technology, customer relationshipsand the know-how of our people – in the face of a contracting andconsolidating global market. We had every intention of leading thatconsolidation, as it is clear that there will be fewer players in ourindustry in the future. It is clear now that Nortel will not be one ofthem in our current form.

But, to maximize the value of our businesses, we will leverage the opportunity that consolidation presents.


Thereare important implications that flow from this decision that we must bevery transparent about. If we are successful in selling our otherbusinesses, Nortel will not emerge from the process that began with ourfilings for creditor protection. Nortel will apply to delist its commonshares and the NNL preferred shares from trading on the Toronto StockExchange. We do not expect that the Company’s common shareholders orthe NNL preferred shareholders will receive any value from the creditorprotection proceedings, and we expect that those proceedings willultimately result in the cancellation of these equity interests. If weare not successful in finding buyers, then we will evaluate otheralternatives for those businesses at that time.


Wehave continually sought a solution that would allow us to emerge fromthe process and continue writing the history of this storied company.We have looked at every possible alternative, but we believe that thisis the best path to provide clarity to our customers and employees,preserve the innovation that is the Nortel heritage and maximize valuefor all creditors, including Nortel employees and pensioners. For somethis will mean a potential path forward in a new home. For others, itwill mean an end to the uncertainty and a need to move on to newopportunities. I am confident that this is the truly the best outcome.


The Road Ahead


Westill have much work ahead of us. Continuing to stabilize our customerbase, even as our businesses possibly become part of other companies,is key to achieving the best return on these assets. Working topreserve that value is important to all of us and other stakeholders.


Oneof our top priorities will be doing everything we can to ensuresuccessful integration with the acquirers of our businesses. Capturingthe full value of Nortel’s strengths will be their objective, and wemust do everything in our power to see that happens. I am deeplycommitted to achieving that goal in the coming months.


Iwant to assure you, as we move forward, we will make every effort to betransparent around the sale of any of our businesses and the timeframefor filing our final plan with the courts. There will be many questionsyou will have and we will try and answer them to the best of ourability.


Iwant to again thank you for your hard work and dedication over the lastfew months – and for so many of you – years at Nortel. There’s noquestion, the know-how and innovation that began at Nortel willcontinue to influence and lead our industry as our businesses and manyof our people find new homes under new banners. The new players createdwill have every opportunity to succeed precisely because they arestanding on your shoulders.


Thank you for all you are doing for Nortel,




Two quick hits before I go. Jerry Diakow, founder and long time GM of Oki Data Canada,has left Raritan Canada. The company is downsizing its operation inCanada. Diakow did a fantastic job in building up the KVM maker in thiscountry for five years through his efforts with Tech Data and the channel. CDN wishes Diakow the very best.


Ralph Hyatt, the GM of Toshiba Canada,has been promoted to lead the newly formed Digital Products divisionfor the notebook vendor. He will retain his current post as Canadianchief.

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