Nortel decentralizes R&D, cuts CTO position

Nortel Networks Corp has instituted another round of cost-cutting and a structural re-organization that sees the elimination of the position of chief technology officer (CTO). Nortel says the moves reflect the growing impact of the "sustained and growing economic downturn" and end the tenure of John Roese, who was hired as Nortel's CTO in mid 2006 to coordinate and execute Nortel's overall R&D strategy (R$, July 7/06).

Roese was one of five executives cut loose by the beleaguered high-tech giant, which is eliminating another 1,300 positions to achieve annual gross savings of $400 million by 2009. The job cuts mark the third round under president and CEO Michael Zafirovski and the 15th in eight years under four different CEOs.

The latest financial data show that R&D has also taken another hit, falling to $377 million in Q3/08, down from $417 million in Q3/07 and $441 million in Q2/08. Under the latest reorganization, R&D will no longer be a separate corporate entity, with each research division being folded into its respective operating division.

Roese was unavailable for comment, but he reflected on the latest developments in his final Nortel blog post November 10 on the decision to decentralize R&D.

"With that change, the central CTO and R&D functions will be divided and moved into each BU (business unit) and, as such, my role is no longer needed," he wrote. "Intellectually, I feel that this is the right thing for Nortel because what the company needs more than anything else at this time is agility to maneuver in a complex market … if you must take some risk on scale and efficiency to get that, it is clearly worth it."

Despite leaving Nortel as of Jan 1/09, Roese says he has achieved much since he was brought in to "help correct many years of neglect on R&D".

"We have clearly developed new and innovative technology that is core to the new strategy," he wrote. "We have also transformed, cultivated and cared for the R&D talent of the company to prepare them for the next chapter ... They will continue to be the bright light of opportunity for the industry and the most significant source of innovation in our market."

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