TORONTO – Nortel Networks Corp. (NT), one of the world's biggest telecom equipment makers, warned Thursday it will again delay filing restated financial results, shaking investor confidence and sending its stock lower.
Nortel, struggling with an accounting scandal that has sparked regulatory and criminal probes, blamed "revenue reporting issues" for missing its mid-November deadline and said sales could now be revised as far back as 1999.
After months spent trying to untangle accounting irregularities, Nortel said it was targeting completion within 30 to 60 days.
But investors were skeptical, given that Nortel missed self-imposed deadlines in September and October.
Nortel also warned that if it fails to file 2003 results by Dec. 15, the New York Stock Exchange (search) could begin the process of delisting its shares. The delays also put its Toronto Stock Exchange (search) listing at risk, it said.
"This is very bad. It was only two weeks ago that management told us we will have the results for mid-November and now they don't. What little credibility they had is almost gone," said Duncan Stewart, a fund manager with Tera Capital in Toronto.
"This is page after page of 'everything is different, everything we've told you over the last six months is either a little bit or a lot off."'
Nortel shares, which peaked at C$124.50 during the tech bubble, lost 28 Canadian cents or almost 7 percent to C$4 in Toronto on volume of more than 17 million. In New York, the shares fell 24 cents to $3.34. It was the most active stock on both exchanges.
"Clearly investors will be disappointed. We were looking for some resolution by this time and full restatements by mid-November," said Mark Sue, an analyst with RBC Capital Markets in New York.
"Additionally, the initial financial restatements were mostly due to accruals. Now we're finding that revenues are moving around from year to year."
Nortel's accounting scandal erupted in March when it warned it would need to restate results for the second time in six months. It fired CEO Frank Dunn in April and warned any results filed after 2000 should not be relied upon.
It said Thursday it plans to release preliminary unaudited results for 2003 and first half of 2004 as soon as practicable, and limited preliminary unaudited third-quarter results by mid-December. More complete results would be filed within 30 to 60 days.
While it has not finalized its financial results for the third quarter of 2004, Nortel expects to report cash at Sept. 30 of about $3.4 billion.
Nortel announced further planned revisions to revenue, including downward revisions for 1999 and 2000. Previous revisions have not gone past 2001.
The changes would increase previously announced sales by about 8 percent in 2001, 4 percent in 2002 and 5 percent in 2003.
Because of the revenue adjustments, Nortel sees the company's revenue percentage growth to be in the low single digits for the full year 2004 over 2003.
Nortel said it now expects the restatements will reduce 2003 profit by about 35 percent, rather than the 50 percent previously forecast.
Shareholders have alleged that Nortel officers cooked the books so the company could turn a profit in 2003 and they could benefit from a bonus plan. Those charges have not been proved in court.
Nortel has fired 10 executives including Dunn and is demanding repayment of $10 million in bonuses.
($1-$1.20 Canadian)
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