Nortel re-restates results, fires CEO
Incredible shrinking earnings
Nortel Networks today sacked its CEO, CFO and controller and said it would restate financial results for the second time in five months. Earnings for 2003 will only be half of what was previously stated, said Nortel, which will delay future earnings results and keep plugging away with an internal investigation into accounting practices.
Nortel has sent CEO Frank Dunn packing and tapped former Teledesic - a satellite communications company - CEO William Owens as his replacement. Former CFO Douglas Beatty and former controller Michael Gollogly will leave as well, with William Kerr and MaryAnne Pahapill filling the respective posts. In March, Nortel placed Beatty and Gollogly on paid leave of absence. Four unnamed senior finance executives have been placed on paid leave of absence, while the internal investigation continues.
"The Board of Directors believes that the actions announced today are about accountability for our financial reporting and are in the best interests of the Company and all of its stakeholders, including our investors, customers and employees," said Lynton Wilson, Nortel's Chairman. "These actions are an important step in the process of restoring confidence in the Company's leadership and financial reporting."
Nortel joins fellow IT giant Computer Associates on a less than impressive list of companies that have replaced their CEOs this month due to accounting concerns. CA turned former CEO Sanjay Kumar into a chief software architect and restated figures for 2000 and 2001.
Nortel has yet to determine "the full extent of adjustments that will be required" to its own figures, but it does know that net earnings for 2003 will likely be lowered by close to 50 percent. The earnings will transfer to previous fiscal periods, lowering net losses for 2002 and 2001. Nortel does not expect a "material impact" to past revenue totals.
"In addition, in light of the foregoing, the Company has not finalized its financial statements as at December 31, 2003," Nortel said. "At this time, the Company cannot estimate the impact of any such adjustments on its results of operations or financial position." Nortel has been a bit vague in the particulars of the accounting snafus. The company has confirmed that auditors found $900m in liabilities that had been accounted for in an incorrect manner.
The US SEC (Securities and Exchange Commission) and Staff of the Ontario Securities Commission (the OSC) are currently investigating Nortel. ®