CEO John Roth will retire in April 2002, Nortel said. The company also said Friday that Chief Operating Officer Clarence Chandran is leaving for medical reasons. Chandran has been on medical leave since March due to injuries sustained in a June 1997 stabbing in Singapore.
During Chandran's medical leave, Roth has been more involved with Nortel's day-to-day operations. Nortel said the departure of Chandran, who was expected to help recruit a CEO to replace Roth, has accelerated the company's search for Roth's successor.
"Since Clarence is no longer available in our succession planning, I'll be working with our board of directors to undertake a search for my successor," Roth said in a release. "Our priority is to have my successor in place well before I retire, to ensure a smooth and orderly transition. I will not be leaving until our annual meeting next year. This gives us plenty of time to recruit a successor and ensure a smooth transition."
There have been rumors that the Brampton, Ontario-based company was attempting to reorganize itself in the wake of Chandran's medical leave.
Things have been shaky at the company, one of the major telecom-equipment manufacturers. Nortel warned investors in March that it saw sales slipping--a slide that turned into a loss of $385 million for the first quarter. It had previously stated that it would have to let go as many as 10,000 employees as part of a cost-cutting program. Shareholder lawsuits and concerns about the company's cash position followed.
And Thursday, the company said it was exiting the digital subscriber line access business to focus on higher-growth markets. Nortel entered that market with its acquisition last year of Promatory Communications for about $778 million.
Analysts applauded that move, however. "(It's) a sign that perhaps Nortel is beginning to shift its focus to attaining profitable growth, as opposed to its historical bias toward market share," according to Robertson Stephens analyst Paul Silverstein.
Things have been tough all over in the telecom-equipment sector as carriers trim spending. And several analysts have said that things will get worse before they get better.
Nortel may also be stung by outstanding loans it made to suffering telecommunications service providers. That, along with slipping sales, has prompted some analysts to raise questions about the Canadian company's cash position.
The company may need to dip into its $2.5 billion credit facility to fund its business in 2001, A.G. Edwards analyst David Heger said in a research note. But that credit line may not be enough. "The company is facing a severe cash shortage that cannot be addressed by the existing credit line or the company's ability to raise other forms of debt," said Heger.