RESEARCH TRIANGLE PARK, N.C. — Chief Executive Officer Mike Zafirovski’s aggressive efforts to remake Nortel continues at a brisk pace.
After Nortel (NASDAQ: NT) completed a reverse 10-for-1 stock split on Friday, Nortel early Monday announced formally the sale of one of its divisions to Alcatel-Lucent for $320 million.
The deal involves Nortel’s universal mobile telecommunications system (UMTS). Nortel and Alcatel announced in September a basic agreement on the sale.
Since taking over Nortel a year ago, Zafirovski has implemented a wide range of cost-savings measures, hired a largely new management team, and tightened the firm’s product focus. His cost-savings plans call for $1.5 billion a year in savings by 2008.
Also last week, Nortel announced a joint venture with Southeast European Communications and Investments to sell networking gear across the region. The first sales offices will be opened in Bulgaria, Serbia and Macedonia.
Zafirovski is a native of Macedonia.
Alcatel just last week wrapped up its acquisition of U.S.-based Lucent Technologies.
When Nortel and Alcatel close on the UMTS transaction, some 1,700 Nortel employees will transfer to Alcatel, according to Nortel. Most are engineers based in France Canada and China.
Nortel employs some 2,100 people at its campus in Research Triangle Park.
Zafirovski has decided to sell or reduce Nortel’s involvement in certain product areas in order to focus on markets where he believes the telecommunications provider has the opportunity to achieve a dominant position. Among areas of focus are WiMax, a technology for wireless broadband delivery, and emerging fourth-generation wireless networks.
Nortel’s reverse stock split reduced the number of shares from more than 4 billion and drove the share price up to $21.15 at the close of trading. The stock had closed at $2.15 the previous day.
More than 9.36 million shares were traded, with the stock hitting a high of $21.41 and selling as low as $20.24.
Analyst firm Robert W. Baird reacted to the stock move by maintaining its “neutral” rating on Nortel.
Regarding the sale of the UMTS unit, Zafirovski said the deal “will allow Nortel to increase resources dedicated to our strategic business priorities.”
Richard Lowe, president of the Mobility and Converged Core Networks group for Nortel, said the company would put emphasis on 4G development to deliver high-speed broadband services to mobile users.
“Nortel is focused on providing the foundation for the coming mobile video and multimedia revolution that mobile network operators will soon face,” he said. “At the same time, we will continue delivering superior value to our GSM and CDMA customers, as well as our customers that have deployed our UMTS core networks”.
GSM stands for global system for mobile communications. CDMA is the acronym for code division multiple access. Both are for digital transmission of wireless data.