Nortel Networks Ltd. (NYSE/Toronto: NT) today said there would be further delays to its internal audit and restatement of earnings; and the company released more details about its financials, including the fact that $250 million in revenue reported in 2000 will be "permanently reversed."

Nortel's stock traded down 6.7 percent, losing US$0.24 to $3.34. Nortel has already repeatedly delayed its filing, frustating many investors. Others may have been spooked by the size of the numbers released by Nortel today.

"Rev of US$250M from 2000 will be permanently reversed and another $2.25B will be shifted forward to 2001-2003," wrote UBS AG analyst Nikos Theodosopoulos in a research note issued today. "This implies that in 2000, the height of the tech bubble, revenue was distorted by $2.5B or 9%."

Theodosopoulos is maintaining a Neutral rating on the stock with a $3.60 target price.

With the announcement, Nortel appears to be pushing the limit of the patience of its shareholders. Since revealing an accounting scandal and becoming the target of a Securities and Exchange Commission (SEC) investigation last spring, Nortel's accounting restatement, first expected in July, has now dragged on for about half a year (see Nortel Misses Halloween Target).

The statement, released today by president and CEO Bill Owens, struck an almost sheepish tone, as if to say, "Sorry guys, but this is really hard."

Nortel has scores of people working to unravel the accounting mess, and Owen went to great pains to justify the delays by the complexity of the project.

"The challenges of reviewing and verifying hundreds of thousands of documents and communications and related accounting entries over multiple fiscal periods have been monumental," says Owens in the statement. "We have dedicated every possible resource to completing the restatement, including the continued commitment of many hundreds of finance personnel and more than 200 personnel from a number of outside consultants and advisers."

Nortel told Light Reading in September that the combined number of folks working on its accounting, including the 200 outsiders, was about 650 people (see Nortel Restates Delay of Restatement ).

Today's statement included the most detail to date that Nortel has released on the project. Nortel now expects "low single digit" growth in 2004. These growth targets have been slipping since the company's frequent updates first started appearing last summer. Nortel's balance sheet appears to be stable, however, as Nortel says it expects to report $3.4 billion in cash at the end of September 30. That's down slightly from the $3.7 billion it reported in cash during the comparable quarter of 2003, but the company notes that there has been "no material effect" on its cash position through the restatement.

But wait, there's more!

Nortel also released the latest details of what is going on under the covers, including specifics about which revenues were overstated and by how much. The full details can be read about in the news release, which is here.

Here are those details:

So what's next? Nortel says it's setting up a new "timeline," for the final stages of the restatement. It expects to file full financials for 2003 "within 30 to 60 days." [Ed. note: What are the Vegas odds on that?] It plans to release "limited preliminary unaudited results for the third quarter of 2004 by mid December 2004."

"As soon as practicable thereafter," Nortel expects to file its unaudited financial statements for the third quarter of 2004, and related periodic reports and any required amendments to periodic reports for prior periods.

The big question now, however, is how much investors practicably will believe.

— R. Scott Raynovich, U.S. Editor, Light Reading