Analysts see Nortel, Motorola settling CEO lawsuit <Reuters.com, Thu Oct 20, 2005 02:43 PM ET>
OTTAWA, Oct 20 (Reuters) - Nortel Networks Corp. (NT.TO: Quote, Profile, Research) (NT.N: Quote, Profile, Research) is expected to quickly settle a lawsuit that was filed against its incoming chief executive by his former employer Motorola Inc. (MOT.N: Quote, Profile, Research) , several analysts said on Thursday.
The lawsuit alleges that Nortel's newly appointed chief executive, Mike Zafirovski, broke agreements by accepting the top job at Nortel and that his new role will inevitably result in the disclosure of Motorola's trade secrets.
Motorola has asked for an injunction to prevent Zafirovski, slated to join Nortel on Nov. 15, from working at the Brampton, Ontario-based company for two years, beginning July 29.
The suit, which also seeks the return of at least $11 million from Zafirovski for violating various agreements with Motorola, does not name Nortel as a defendant.
The two companies compete in the wireless network equipment market, and Nortel buys components from Motorola that it uses in certain products.
"I don't think Motorola will prevail," Charter Equity analyst Ed Snyder said.
"Think about the implications of this. Mike would not be able to go to anybody in the telecoms space if Motorola sticks to this ... There will probably be some sort of agreement struck."
In its complaint, Motorola said Zafirovski agreed in writing, on eight occasions, not to take a position with a competitor two years after his departure from Motorola.
Zafirovski, voluntarily resigned from Motorola on Jan. 31, effective July 29, Motorola said.
"Zafirovski will be violating his agreements by working at Nortel and he cannot perform his job at Nortel without inevitably disclosing or utilizing Motorola's trade secrets and propriety information," the complaint adds.
Analysts said that courts often take a critical view of non-competition clauses, because they are often too broadly worded, making them unrealistic and unenforceable.
"Historically, the courts have looked pretty dimly on non-competitive agreements because guys have got to be able to make a living," Snyder said.
Nortel has said it plans to discuss the issue with Motorola to try to resolve the dispute.
Nortel shares dipped 6 Canadian cents to C$4.04 on the Toronto Stock Exchange in late trade on Thursday, and were down 5 cents at $3.43 on New York. Motorola shares were up 12 cents at $21.14 on New York.
"It's nice that the market is voting, more or less neutrally, to this. No big deal," said one telecom equipment analyst who asked not to be named. "I'm sure they'll come to some agreement, out of court, fairly quick."
Zafirovski was president and chief operating officer of Schaumburg, Illinois-based Motorola from 2002 to 2005.
"We believe that Nortel was aware of this possible conflict and has prepared itself accordingly," Desjardins Securities analyst Paul Howbold said in a note. "We believe this dispute will be settled."
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