Nortel disbanding federal unit

Northern Telecom Inc. is dismantling Nortel Federal, the division of the company that had traditionally dealt with federal customers.

Nortel Federal employees were notified of the plan last month. A number of Nortel Federal executives have been laid off as a result of the ongoing restructuring, according to industry sources. Meanwhile, Nortel Multimedia Communications Systems, the U.S. commercial unit of Northern Telecom, is taking on federal marketing activities.

A spokesman for Nortel Multimedia Communications Systems said the Nortel Federal shutdown is part of an overall reorganization that would reduce the company's overhead while making it more responsive to customer demands. He added that Nortel Multimedia Communications Systems would delve into increased direct sales to federal agencies and expected last week to obtain its first General Services Administration schedule contract.

Because many of the procurement rules unique to the federal government have been lifted, Nortel Multimedia Communications Systems officials said they believe its business can be handled just as efficiently by its commercial operation. "If [contracts] are done on a commercial-like business structure, then why do we need a separate unit?" the spokesman asked.

Nortel Multimedia Communications Systems has generally sold its switches to the government via resellers or communications service providers. The spokesman said Nortel Multimedia Communications Systems' move to direct federal sales resulted from procurement reforms such as the Federal Acquisition Streamlining Act that will make it easier to sell to the government.

"Because of the new way the government will be doing business, we are going to a new way of doing business," he said.

Personnel at Nortel Federal refused to comment on the action, but sources said many of the division's upper managers have left the company. They said at least three of the division's vice presidents were laid off as well as most of the division's support staff.

The spokesman declined to reveal how many employees were affected, but he said the layoffs did not touch employees who work directly with customers. Personnel working with internal information systems, purchasing, contract administration and other staff support jobs were hit hardest, he said. "They are not the ones out there dealing with customers every day," he said. "The customers will still be working with the people they are working with now. But there won't be several different reporting layers, so we will be more responsive to them."

He said the company will retain a presence in the area, but he did not reveal how many employees would remain.