Investors aren't in the mood to wait for explanations of Nortel Networks Ltd. (NYSE/Toronto: NT) CEO Frank Dunn's firing. Dunn, who was sacked along with former CFO Douglas Beatty, former controller Michael Gollogly, and several others, was replaced this morning by William Owen, who has been a company director since 2002 (see Nortel Dismisses Dunn).

The networking equipment maker's shares fell $1.62 (28.72%) to $4.02 in midday trading on Wednesday after the company's housecleaning announcement. Today's freefall has taken Nortel's stock price down more than 47 percent from its 52-week high of $8.50.

Why the selloff? Here's a reason: Given Nortel's financial mess, it's possible the company isn't nearly as healthy as it has been telling the public. And, given Nortel's past six months of financial headaches, investors are asking themselves if it's really worth hanging on and waiting for another shoe to drop.

Back in 2002, the company filed a significant restatement of its enterprise equipment revenues and then declined to talk about it. Oops!

• Nortel Shuffles the Numbers

A bit later, the company declared its financial statements for some 14 quarters would have to be restated. Oops!

• Nortel Posts Small Q3 Profit
• Nortel Keeps to Profit Path

Then Nortel refiled its results for the past, delayed its earnings, replaced its CFO, and announced it was being investigated by the Securities and Exchange Commission (SEC) and the Ontario Securities Commission. Oops! again.

• Nortel Refiles Results
• Nortel Delays Earnings Report
• Nortel Rattles Nerves
• Nortel Replaces CFO
• Nortel Announces SEC Investigation
• OSC Investigates Nortel
• SEC Pops In on Nortel

Nortel isn't yet elaborating on what specific wrongdoing Dunn and the others were involved in. On a conference call today, Nortel executives broadly stated that Dunn's termination was "about accountability for financial reporting."

At the moment, Nortel is saying its cash balance and reported revenues for prior quarters won't be affected by the scandal. But the company is getting ready to erase some $250 million -- maybe more -- in profits reported for 2003. The company reported $499 million in net earnings for that year and now says -- Oops! -- it is off by half.

To wit, the net profit Nortel reported for the first half of 2003 should have been a net loss, according to the company's latest revelation. Nortel says the restated net earnings "will largely be reported in prior periods, resulting in a reduction in previously reported net losses for such periods including 2002 and 2001."

As ever, the remaining executives say that Nortel will tough it out and restore its credibility. "To our shareholders, we're committed to getting this thing right," says Bill Owen, the new CEO. "Financial accountability will become our watchwords."

As watchwords go, "financial accountability" is probably better than "Oops!"

— Phil Harvey, News Editor, Light Reading