A group of formerNortel Networks Corp. executives is mounting a bid to save the bankrupt Canadian tech jewel from imminent breakup. However, calls to the government to delay the sale of any of the company’s assets until the group can raise enough cash to buy Nortel appear to have fallen on deaf ears.
The bid to save Nortel comes nearly a year after Frank Dunn, former CEO of the Brampton, Ont., telecom products maker was charged by the Royal Canadian Mounted Police with making false entries in the company’s financial statements. The charges have yet to be proven.
“We want to make it clear we’re not asking the government for money. All we’re asking is that the government not allow Nortel to be scattered to the four winds,” said Ian Craig, who once occupied various executive positions at Nortel, including president for broadband and wireless communication and chief marketing officer, his last post before retiring in the 1990s.
Craig is now semi-retired but still serving in boards of various corporations including CAE, a Montreal-based manufacturer of simulation and technologies, and Suwanee, GA-headquartered broadband product provider Arris. He is a member of a group which includes, among others, Robert Ferchat, former president; David Mann, former vice-president; David Patterson, former Nortel director; and David Archibald, former Nortel deputy general counsel.
If they get their hands on Nortel, the group intends to build up the company’s research and development arms and other assets such as its optical and carrier Ethernet, wireless and voice over IP divisions.
Ferchat said if his ad hoc group, dubbed “Save Nortel,” were to acquire the company, they would not necessarily sell off the enterprise division.
“The plan is, if we can get in before the (units) are sold, is to acquire everything that’s left and take some time to sort through and see what it is we need to keep to make it a viable enterprise,” he said in an interview.
“I don’t know what the intellectual property involved in the enterprise business is, and the last thing we really want to do is to decrease our store of intellectual property, patents and cross licenses,” Ferchat said. “The current sales process would end up with nothing left and we’re trying to have as much left as we possibly can because we think there’s a huge and growing market for networks, particularly broadband networks.”
Meanwhile Nortel customers are awaiting announcement of the company’s restructuring plans.
A spokesperson for Nortel said the company cannot comment on reports specifically but added that business plans will be taken up if they are put forward.
“No decisions have been taken yet and we are exploring all options, including those from third parties if they are presented to us,” said Ryan Hill, an Ottawa-based spokesman for Nortel.
“If Ferchat and his group have a business plan to bring to the table, they can do so as part of our overall restructuring process,” Hill added.
The former executives are currently approaching financial organizations to help raise $1 billion — enough cash, they hope, to gain a seat in bargaining table and get a peek at Nortel’s most current data to be able to fine-tune their restructuring plans for the company. The group is not, Craig stressed, seeking a government loan, as was previously reported.
“It’s sort of a chicken-and-egg situation. We can’t fine-tune our plan without getting into the data room. We can’t get into the data room without the money,” Craig explained.
Ferchat stressed the group is seeking equity investors, not a loan.
“We don’t wish to borrow that because debt has been the problem,” he said. Asked whether they would you try to acquire it before they emerge from bankruptcy protection, Ferchat said: “that’s a question for lawyers.
“In the bankruptcy process there has to be a process for a significant reduction of the debt and what I think what that really means is you would probably convert a lot of the debt to equity. That’s just speculation on my part, but that’s the way everyone else has done it.”
In April this year, Ferchat met with Transport Minister John Baird, the Conservative MP representing the riding where Nortel’s Ottawa campus is located. Baird then directed the group to Industry Minister Tony Clement, who is currently “looking into our plans,” according to Craig.
But he characterized the politicians’ reaction to their proposal as “cool.”
“I would call it the ‘silence of the lambs’. Everyone knows danger is imminent but no body wants to act,” he said.
Industry Canada has not responded to ITWorldCanada’s request for a comment.
However, sales remain down 36 percent from the previous quarter as telecom equipment maker continues to look for buyers of its divisions.
The former executives claim their main motivation is to save jobs and keep the former Canadian tech darling in Canuck hands.
“Breaking up Nortel and selling off its parts to buyers will result in the loss of its flagship R&D centres and further loss of high-value tech jobs in Ottawa and other parts of the country,” said Craig.
The former Nortel executive said the current management team led by CEO Mike Zafirovski has got it all wrong.
“Zafirovski is trying to drive the company through process, not innovation, which is the actual strength of Nortel,” he said.
He said Zafirovski’s background was in “selling consumer handsets” for Motorola and was ill-suited for the demands of promoting enterprise-grade telecom networking hardware.
“You can’t run Nortel on 6 Sigma process alone. Sure, that worked for GE, but it took 15 years to gain traction. Nortel doesn’t have that much time,” Craig said.
Ferchat and his group are also lobbying for federal infrastructure money to finance the creation of a high-speed Internet network that will link the country’s businesses, hospitals, schools and other institutions.
Ferchat envisions the network as a catalyst for economic growth and an opportunity to connect Canadians that live in remote areas. Australia, which has a vast geographic area, has deployed something similar and Alberta began something called the SuperNet project several years back.
The group proposes that the infrastructure be funded in part with Nortel’s research and development tax credits.
“Japan has incredible program of taking gigabits of data to the home so that would mean you could deliver CATV and a whole bag of tricks,” Fer