Battered, bothered, bewildered – Nortel and Lucent shareholders

Nortel lawsuits, Lucent loans struggle

SGI logo hardware close-up

Cisco's recent results may have been disappointing, but that's nothing compared with the troubles of rival
networking industry heavyweights Nortel and Lucent.

Nortel Networks faces at least three class-action lawsuits and allegations of insider dealing for allegedly misleading investors about the health of its business when it posted its fourth quarter results last month.

The optimistic outlook painted by Nortel in those results was undermined less than a month later when the firm issued a profits warning and announced a program to slash 10,000 jobs from its workforce. The firm announced revenue would only grow about 15 per cent, half the previous estimate, and admitted it was likely to make a loss in its current quarter.

Court documents filed in conjunction with the lawsuits allege that the president of Nortel's ebusiness solutions division, William Conner, and president of global operations, Chahram Bolouri, cashed in $7 million in shares in late January, before the value of its shares went down by more than a third in the wake of its profit warning.

Nortel has defended its senior executives against allegations of any impropriety and said they sold shares only to cover the cost of exercising options. Reports suggests that at the same time as Conner and Bolouri were reducing their holding, chief executive John Roth was increasing his holding.

Where credit's due

Meanwhile over the border, New-York equipment maker Lucent is also mopping up in the aftermath of recent disappointing financial results.

Reports by CNN this morning suggest that Lucent chief executive Henry Schacht has secured last-minute support of bankers for a restructuring plan which aims to turn around the fortunes of the giant telecommunications equipment maker. Lucent has reportedly secured a $6.5 billion line of credit before the deadline of existing credit facilities expires on Thursday.

The borrowing facility will help Lucent implement a seven-point restructuring plan which will involve a cut in Lucent's workforce by 10,000. To finance its debt, Lucent will make an initial public offering of its chips and optical components subsidiary Agere Systems later in Spring. ®

Related stories

Nortel slashes more jobs
Lucent to restate sales and cut 10,000 jobs

External links

Nortel's Q4 results
Less than a month later Nortel cuts forecasts and jobs

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