Nortel financial troubles continue

In less than a month Nortel Networks Ltd. has lost its chief financial officer, paid out $2.4 billion in cash and stock to settle shareholder lawsuits stemming from accounting errors, announced it will be cutting 9 percent of its workforce, and now is delaying the filing of its annual financial report for 2006. Worse yet, the company announced it will be restating its financial results for 2004, 2005 and the first nine months of 2006, and will make adjustments to multiple periods prior to 2004.
The latest setback for the Toronto-based company indicates that it has yet to accurately report financial reports for any year in the current decade. Now, its CFO Peter Currie is trying to put a good spin on the barrage of troubles before he leaves the company at the end of April.
“This restatement has no material impact to our fourth quarter 2006 operating expectations or performance,” he said in a news release announcing the delay. Early last month, Nortel said revenue from the fourth quarter is expected to reach $3.32 billion, a 10-percent increase from the same period last year.
Through the financial restatements, the company expects to see an increase for the nine months it will revise for 2006 with revenues jumping to $24 million and net earnings bumping up $15 million. However, the company expects to see a reduction in revenues for its previously reported 2005 and 2004 financial results of approximately $28 million and $33 million, which will reflect a net loss of approximately $87 million and $42 million, respectively. Furthermore, the company anticipates a further loss in revenue of approximately $27 million and a loss in net earnings of $5 million for its financial results prior to 2004.
While Wall Street was pleased with the company’s recently announced plans to lay off 9 percent of its employees, it was less impressed with today’s news; the company’s stock was down more than 2 percent in trading.
This is the second major restatement announcement from Nortel.