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July 5, 1993

STERN COMES IN FOR NORTHERN TELECOM BARRAGE

By CBR Staff Writer

Now that he’s out of the picture, Unisys Corp alumnus Paul Stern is catching a lot of the flack for Northern Telecom Ltd’s less than rosy immediate prospects: according to Reuter, the timing of Stern’s departure has led some analysts to question his part in Northern’s current troubles, but many interviewed said they would rather not be named on such a sensitive issue; in January, the Canadian said Stern would give up the chief executive’s post to pursue other interests days after the company posted a record profit $548.3m for 1992 and a 23% year-over-year jump in fourth quarter earnings to $255.6m and I’m amazed that they could go from such a brilliant performance in the fourth quarter to an operating loss here – that seems to suggest that in the second half, there may have been elements of artificiality, one Canadian analyst said; They took in everything they could take in at the top line and they held back everything they could on the cost side, he added, suggesting that the weak first quarter and the promise of a second quarter loss has investors wondering if Stern sacrificed 1993’s strength to leave the company in a blaze of glory; analysts remember Stern’s tenure for his strong personality, his positive handling of Northern Telecom’s cost structure and his big push for international growth, which pushed up international business to 25% from 8% in four years; however he also carries the less positive reputation of being difficult with employees and clients and focussing on the bottom line to the expense of high potential product development, one US analyst said – He had two things he had to do – he had to improve the quality of customer relations and he had to improve the quality of product; he ignored the latter – he ignored product almost entirely; if anything on the customer relations side, he probably made it worse.

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