Business Blog: Hoover’s Business Insight Zone

Nortel Networks has been hurting for a while now, but I’ve long been convinced that Mike Zafirovski could be the person to turn it around. Mr. Z. compiled a great record at GE and (more briefly) Motorola before taking the top job at Nortel. Zafirovski is an operator deluxe, so much so that he’s often been called “Mr. Fix-It.”

The good news for Nortel is that it just reported a small quarterly profit. It’s only a 1% profit margin we’re talking about, but the company has also improved other operating measures, especially gross margins, that could point to future improvements. It will be interesting to see how the company builds on this quarter going forward.

Meanwhile, we can look back for various takes on the challenges Zafirovski and crew face, as they’ve been described over the past couple of years:

• October 2005: Nortel’s Mr. Fix-It: new CEO Mike Zafirovski is a turnaround heavy-hitter
• June 2006: Mr. Fix-It takes on his biggest challenge
• November 2006: Q&A with Nortel’s Mike Zafirovski. The Nortel CEO owns up to disappointment with margins and explains why the telecom equipment maker is stepping up investment in WiMAX technology

Especially good is the June 2006 article from the Globe and Mail, which opens by discussing the challenges Zafirovski faced as a teenage immigrant to the U.S. from Macedonia. It also includes this telling statement:

“He’s a great guy to be in a foxhole with,” said Boeing Co. chairman and CEO Jim McNerney, who worked with Mr. Zafirovski at GE Capital and GE Lighting and now sits with him on the Boeing board. “He’s one of those guys who is pretty fearless. People look at these big challenges and see the glass is half-empty. He’s one of these people who sees the glass half-full and is stimulated by it.”

Setting aside the mixed metaphors, McNerney is getting at something important: Psychological research (e.g. this) is showing that one of the greatest determinants for success is mindset. To take on the challenges of a behemoth/laggard like Nortel effectively, you must have the kind of outlook that McNerney describes. The right mindset doesn’t do the deal all by itself, of course, but given Zafirovski’s long record of operational success, I’d say Nortel’s prospects are looking better and better.