Will 'Mike Z' return to Motorola in Nortel joint venture?

Mike Zafirovski wasn't called the Ironman for nothing. Now, he may scoop up part of Motorola Inc., a company he once sought to lead.

The former Motorola president who participated in Ironman competitions was bypassed as chief executive in favor of Ed Zander about four years ago. He had worked with then-CEO Chris Galvin to lay the foundation for the Razr mobile phone craze and began turning around the company by axing thousands of workers.

Ultimately he paid a non-compete settlement of $11.5 million to Motorola when he opted to became CEO of Nortel Networks Corp. in Brampton, Ontario, near Toronto.

Now the two businesses could become one, the Wall Street Journal reported Monday. The report, using unnamed sources, said Zafirovski could be behind Nortel's talks with Motorola to form a joint venture. Such a venture would make network equipment for wireless phone carriers, with a potential $10 billion in annual sales.

And why not? Zafirovski, affectionately called Mike Z by Wall Street insiders, continues to maintain his family home in Lake Forest. Could he be tired of jetting between Chicago and Toronto since 2005?

"Unfortunately we do not comment on rumors or speculations," Zafirovski said via e-mail.

A Motorola spokeswoman also declined to comment.

Zafirovski's knowledge and experience at Motorola could be a big advantage for Nortel, said Ed Snyder, an analyst with Charter Equity Research.

"Motorola is in much worse shape than Nortel at this point so I would expect any deal to be more favorable to Nortel than Motorola," Snyder said.

The beleaguered Motorola, part of a struggling communications industry, last week said it would consider selling its Libertyville-based mobile phone business. Those rumors have run rampant on Wall Street for about a year, and that was the first time the company acknowledged it was considering such action.

The new report Monday, separate from the mobile phone business, is about Motorola's Home and Networks Mobility business based in Arlington Heights, which focuses on network equipment for wireless phones. This unit also does set-top boxes and other equipment for the cable industry.

Motorola has one other business unit, called Enterprise Mobility, which focuses on government and public sector communications, including two-way devices for police and emergency workers.

Sales or divestments would make billionaire investor Carl Icahn a happy shareholder. Icahn, who unsuccessfully sought a Motorola board seat last year, plans to return this year to get a handful of supporters elected to the board. He harped on former CEO Zander to break up Motorola's businesses, contending the whole was sinking the individual pieces.

Both Nortel and Motorola need additional scale to compete in the industry, said Rick Franklin, telecom analyst with Edward Jones in St. Louis.

"They are competing against much larger companies in Alcatel-Lucent, Ericcson and Nokia-Siemens," said Franklin. "Nokia and Siemens have their own joint venture in this area, so there is precedence for a joint venture in this market."

Such a partnership would be positive for both companies. But a merger would be better, given Zafirovski's experience with Motorola, Franklin said.

"It would make good strategic sense," said Franklin. "Both companies benefit from increased scale, and Nortel's balance sheet would be greatly improved given Motorola's stronger balance sheet. Since Zafirovski is still thought to be commuting to Canada from his Chicago home, a merger might enable the creation of a joint headquarters that would be an attraction for him."

A Motorola-Nortel union?

Motorola

The company's Home and Networks Mobility business in Arlington Heights designs, makes, sells and installs:

• Digital video system solutions and interactive set-top boxes

• Voice and data modems for digital subscriber line and cable networks

• Wireline broadband and wireless access systems.

• WiMax and Long-term Evolution mobile wireless broadband technology

Nortel Networks

This company, based near Toronto, provides equipment for service providers and enterprise networks; supports multimedia and business applications.

• Voice over Internet Protocol infrastructure

• IP-television

• WiMax and Long-term Evolution mobile wireless broadband technology

• Interactive multimedia services, such as interactive multimedia enabled IPTV, gaming, video conferencing and click-to-call with a standards-based, open architecture.

Sources: Motorola, Nortel