TORONTO – Nortel Networks (NT) said sorry to shareholders on Wednesday for an accounting scandal that has bruised the telecoms equipment supplier's reputation and felled its share price, but it promised better times ahead.
Long-suffering shareholders have waited two years to confront the company. Nortel delayed its annual meeting last year as it began repairing years of faulty bookkeeping.
"We very much regret what has happened and we've been committed to addressing the problems head on and solving them," retiring board chairman Lynton (Red) Wilson told the packed meeting.
Brampton, Ontario-based Nortel last faced its shareholders in 2003, before an accounting scandal forced the restatement of several years of financial results. An audit later showed the firm's finances were manipulated to trigger bonus payments.
Nortel has sacked several top executives, including former chief executive Frank Dunn, "for cause" and filed a lawsuit against three executives (officers) including Dunn, seeking to recover C$12.9 million ($10.5 million) in bonus payments.
Wilson said Nortel is "committed to restoring Nortel's reputation," and chief executive Bill Owens is playing a critical role.
"Fellow board members turned to him, a little over a year ago, to take the helm of this ship on very stormy seas," Wilson said of the former U.S. Navy admiral.
"At that moment, Nortel sorely needed the battled-trusted, sure, steady leadership of Bill Owens. He has set about turning this company in the right direction, charting a steady course with a strong vision and firm hand."
Owens said Nortel has mostly delivered on a strategy he announced last August, with a focus on cash, cost and revenue.
"2005 looks to be a good year for us," he said outlining Nortel's efforts to expand its business with government business, services, and partnerships in Asian markets.
"We have momentum," he said, citing a backlog of $4.5 billion at the end of the first quarter, up from $4.1 billion at the close of the fourth quarter.
Nortel expects to cut operating expenses to 35 percent by the end of this year, from 40 percent in 2004. By the end of 2006, it sees operating expenses of 30 percent, he added.
"We've got to get our costs down, we're working very hard on that," Owens told a question and answer session.
Nortel is considering other options for its Brampton headquarters, for example, which Owens said was too big. That could include sharing the space, he added.
Irate shareholders took the company to task on issues that ranged from chastising Nortel for not providing services for the hearing impaired to demanding to know how the bookkeeping chicanery could go unnoticed by the board.
Nortel said it has since tightened its accounting, taking heed of auditors' recommendations.
Shares of the one-time market darling peaked at C$124.50 in 2000, only to crash as the technology bubble burst. It fell more than 99 percent to bottom at 67 Canadian cents in 2002.
Its shares have since hauled themselves off those lows, but have remained volatile in the wake of the accounting scandal. On Wednesday, they were at C$3.27 on the Toronto Stock Exchange (search), and in New York they were at $2.66.