Next up at Nortel: The new CEO

Soon after we met with Nortel President and CEO Frank Dunn last February, he and a number of his lieutenants were fired for accounting shenanigans. The background of his replacement, Bill Owens, should help calm any jittery shareholders: He was once vice chairman of the Joint Chiefs of Staff, the second-highest rank in the military.

He isn’t, however, nearly as steeped in networking as Dunn, who worked in virtually every group in Nortel over a span of 28 years. Owens’ most recent network experience was as CEO of Teledesic, a satellite broadband service company that dried up after the 2001 terrorist attacks drove up the cost of insuring satellites.

But Owens’ pedigree is probably appropriate for the current business challenges. The market is changing fast, with aggressive low-cost challengers emerging from Asia and industry consolidation on the horizon.

One of his first moves was to reorganize the company into two groups, one facing carriers (instead of individual wireless, wireline, optical and other divisions) and one facing the enterprise.

For now he is spending the bulk of his time with carrier customers because he believes the market opportunities are greatest there and because he can reach through them to touch enterprise customers.

The enterprise “has not been the DNA of Nortel,” Owens admits. But he says the future is about bundling and the company’s broad product portfolio and history of innovation will let it compete effectively. “We have the most diverse range of products in the industry and put more into R&D on a dollar of sales basis than any company.”

The primary opportunities Owens sees are around security and shifting to more of a services business, à la IBM. Regarding the latter, Owens says Nortel will offer services to help carriers and enterprises “deal with the operation of networks that are more and more complex.”

He also expects to see industry consolidation over the next two to three years and says Nortel will be a consolidator, not a consolidatee. “For that we need cash, lower costs and revenue,” he says. “We have our treasurer focused on cash.”

Likely consolidation scenarios? “Everyone is talking to everyone,” Owens says. “Chambers has made comments about us, but consolidation won’t necessarily happen along the lines you might think. They might involve the opportunities I’ve talked about in security and services.”

Getting Owens out and about is an important first step in healing Nortel. The company badly needs to show customers it is focused and moving toward a goal. Whether Owens’ goals are optimal remains to be seen.