Nortel shops while its management turns over

Company confirms acquisition plan as executive brain drain takes hold

Nortel has begun discussions with potential takeover targets, according to a Reuters report citing an interview with CEO Mike Zafirovski.

Nortel is looking to acquire companies to expand its reach in key markets, such as the enterprise, VoIP and IPTV. One such target is believed to be 3Com, and others mentioned include Foundry Networks, Tellabs and Sonus Networks.

"We are doing lots of analysis internally on how to grow the company organically and we started discussions recently with companies that we believe can be adding to our growth trajectory," Zafirovski said in an interview, according to the Reuters article. "We're confident that we'll be able to successfully integrate other activities if the pricing is appropriate," he said.

Zafirovski provided few details on the size or scope of any acquisitions that the company might be pursuing, Reuters reported.

Nortel just released second-quarter financials, which fell short of consensus analyst estimates. Its second-quarter revenue of US$2.562 billion was down 8 percent from a year ago, and earnings, excluding charges and other expenses, were US$0.07 per share Analysts expected the company to post US$2.745 billion in revenue for the quarter and earnings of US$0.08 per share.

Nortel also this week announced the departure of Dion Joannou, president of the company's North American operations, effective Aug. 31. Joannou is leaving to pursue other personal interests, Nortel said.

Nortel lost its CFO in April and its Chief Ethics Officer in December 2006, and replaced its President of Caribbean and Latin American operations in June.

"We believe these departures continue to signal ongoing organizational flux, not a particularly encouraging sign at this stage in the company's transformation," states UBS Warburg analyst Nikos Theodosopoulos in a report on Nortel's second quarter.

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Jim Duffy

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