Service Provider Networks / (none) /

Nortel COO steps down; company exits DSL business

By Jim Duffy
The Edge, 05/11/01

Nortel today announced that COO Clarence Chandran, currently on medical leave from the company, has resigned to take additional time to complete his recovery from stab wounds suffered in an assault 4 years ago.

Chandran had been on leave since March to recuperate from wounds suffered in an attack in Singapore in June 1997. Chandran has also resigned his seat on Nortel's board.

Said Chandran in a statement: "I am advised by my doctors that my medical leave of absence, while progressing well, will require more time for me to fully recover, at which time I will resume an active schedule. I have concluded that it is simply unfair to the company to extend my absence on these grounds and the responsible course is to step aside."

"We regret that Clarence is resigning from the company but fully understand and support his decision," said Nortel CEO John Roth in a statement. "We wish him a speedy recovery and success in his future endeavors."

Chandran is the second high-profile executive to leave Nortel in the past few weeks. William Conner, president of Nortel's e-Business Solutions group, left the struggling company two weeks ago to become president and CEO of security software vendor Entrust Technologies (Conner bolts Nortel for security vendor).

Chandran was considered the successor to Roth when Roth retires in April 2002. Nortel is now actively searching for Roth's replacement. Roth said a successor will be in place well before he retires in order to ensure a smooth transition.

"I will not be leaving until our annual meeting next year," Roth said in a statement. "This gives us plenty of time to recruit a successor."

In addition to being president and CEO, Roth assumed Chandran's responsibilities overseeing day-to-day Nortel operations when Chandran went on medical leave. Roth will continue this role until his successor is in place, the company said.

Separately, Nortel is exiting the DSL business to focus on more profitable ventures, in light of the company's sagging financial fortunes of late, according to a report from Reuters.

Citing Nortel sources and Wall Street analysts, Reuters said Nortel will exit the DSL access business it entered by acquiring Promatory Communications last year for $778 million. Nortel was barely making a dent in the DSL market with its IMAS product line, having attained but a 6.3% share of the $3.2 billion market in DSL access concentrators in 2000, according to Dell'Oro Group. Nortel ranked fifth in this market behind Alcatel, Lucent, Cisco and Nokia.

In DSL CPE, Nortel's showing was worse. The company had a 2.6% share of the $1.4 billion market in 2000, ranking eighth, according to Dell'Oro.

"Nortel never made a significant penetration into the DSLAM market," says Jeremy Duke, founder and principal analyst at Synergy Research Group in Phoenix. "This will have minimal effect on their sales, given that it is such a small portion of their overall business. And it will have nominal effect on the competitive landscape. Given that the vast majority of their DSLAM sales were targeted to smaller CLECs, which are currently going belly up or have gone belly up, this a smart move on Nortel's part from a balance sheet perspective."

Nortel's DSL business accounted for $107 million in revenue for the company last year, Duke says. The total DSLAM market in 2000 was $2.8 billion, according to Synergy.

Nortel would not break out the number of employees affected by its exit form the DSL market, but said they are part of the 20,000 staffers to be cut loose by midyear (Nortel cuts another 5,000 jobs). A Nortel spokesman said the company will support its IMAS product line for customers under warranty and is also offering extended service and support contracts for the product line.

Nortel is not offering a migration path to other vendors' products because DSL is a "commodity" business, the spokesman said.

Nortel is restructuring and reducing headcount in light of sagging financials due to the slowdown in capital expenditures by service providers. The company posted a loss of $385 million on revenue of $6.2 billion for the first quarter of 2001. This was down from revenue of $6.3 billion and earnings of $347 million from the first quarter of 2000.