re: Nortel Rattles NervesAs NT goes through yet another confidence-shattering experience, one has to wonder about the root cause.
Who was the CFO during the time period where all these accounting mistakes or irregularities occurred?
Who is now the head of the company?
The answer to both questions is Dunn. The same Dunn that is pulling in US$850k of salary + a gizillion options.
So a few more questions for which I *don't* have answers for: 1. How can the most inept executive get promoted to the CEO position? 2. Why isn't Dunn out there apologizing for the mistake and taking personal responsibility? 3. What does this situation say about Nortel and the character and ability of its CEO?
re: Nortel Rattles NervesAnyone who believes what NT has to say gets what they deserve. This company reported their "blow out" Q4 with UNAUDITED numbers, in a quarter after a "little" $950M accounting problem was found. If anyone bought those Q4 numbers, they clearly do not understand accounting at all. No one ever reports UNAUDITED Q4 numbers. If you ever see that again, run for the hills.
That is not the only fast and loose feature of NT's version of the truth. I am still trying to figure out their "VoIP" story. They lack a core IP router, having to do a hasty joint venture with AVCI to get the VZ business, so it appears. They say they lead the market in "VoIP", when their main switch line, the Passport, appears to be ATM based. "Voice over packet" is technically a correct description for such a solution, but "VoIP" specifically is not. I therefore cannot figure out what they are really up to at all.
The best treatment for this bunch is to just ignore them.
For all its presumed progress, Nortel (NT:NYSE) hasn't forgotten how to infuriate investors.
What's worse than having to restate three years' worth of financial reports? Maybe having to restate the restatements just a few months later, as Nortel said Thursday it might have to do.
Adding to the problem, the company says it might be late with its annual report, missing federal deadlines and violating agreements with its lenders. And though some investors who have driven the stock up sharply this year were willing to give Nortel the benefit of the doubt, all the bumbling with the books up in Brampton, Ontario, may have caught the attention of the Securities and Exchange Commission.
"If there wasn't an SEC investigation before today, there almost certainly will be one now," says John Gavin, president of SEC Insight, a Plymouth, Minn., research shop.
A SEC representative declined to comment. A Nortel spokeswoman declined to comment on whether the SEC was investigating, but said that the company has informed all the proper regulatory agencies.
Gavin says that in October his firm asked the SEC for Nortel documents under the Freedom of Information Act. That request was rejected based on a so-called law-enforcement-related exemption, says Gavin. Typically in the past, the SEC has used the law-enforcement exemption when it has been involved in some sort of investigation, he says.
Nortel shares fell more than 11% at one point in early trading Thursday, but they had mostly recovered by early afternoon on heavy volume. And though the accounting screw-ups are a Nortel problem, Wall Street was quick to lash fellow gear pears like Ericsson (ERICY:Nasdaq) , Corning (GLW:NYSE) , JDS Uniphase (JDSU:Nasdaq) and Lucent (LU:NYSE) .
The redoubled attempts at accountability at Nortel could undercut the confidence investors had gained as the company started talking about turning the corner on its massive restructuring and guiding for stronger sales growth.
The company's press release Wednesday evening pointed to the timing of accruals and provisions as the focus of the internal audit. To analysts and investors, this suggests that, unlike accounting misdeeds of Lucent and Qwest (Q:NYSE) , any problem could stem not from phony sales but whether Nortel booked revenue on the correct schedule.
Unlike many products that are booked as a sale the moment they are delivered, telecom equipment has to be shipped, installed and certified before the proceeds can be recognized. This process can take months if large network systems are involved and that usually requires gear suppliers to spread the revenue over several quarters independent from when the actual payments arrive.
"Assuming the cash is real and this isn't Parmalat, this could prove to be an opportunity," says Paul O'Neil with Knight Bain Seath & Holbrook, a Canadian pension fund that holds Nortel stock.
"If it comes out that they were being conservative, then what will the Street say? Shame on you?" says O'Neil.
But SEC sleuth Gavin isn't quite as confident. Though there's no indication whether the SEC would be looking into something as big as accounting fraud or as minor as some junior officer's insider trading, Gavin says any probe should give investors some pause. After all, the audit committee now wants to re-examine the work it just completed a few months ago.
To say it's a case of Nortel being too conservative with the books "requires a leap of faith that the audit committee's behavior doesn't seem to allow," says Gavin.
re: Nortel Rattles NervesI am not surprised. Frank Dunn is as incomptent as Kenneth Lay is crooked.
1. How can the most inept executive get promoted to the CEO position? >>>> No-one else wanted the job.
2. Why isn't Dunn out there apologizing for the mistake and taking personal responsibility? >>>> This guy is a "Bean Counter" and has the personality to match. Even as a "Bean Counter" he failed miserably: He was the CFO when the discrepancies that caused the first restatement of results occured.
3. What does this situation say about Nortel and the character and ability of its CEO? >>>>> I have never heard Frank Dunn make a projection about Nortel that goes beyond the current quarter. This contrasts greatly with Jean Monty (former CEO of Bell Canada and Nortel) who would give his 10 year vision and direction for the company.
This idiot (Frank Dunn) was still laying off people after Nortel finally had a good quarter. This does not inspire confidence in the employees nor shareholders.
re: Nortel Rattles NervesBomb the Baldwin's house! Not a bad idea!!!
I'm sure Bush wouldn't mind. Surely there's some way we can blame them for 911 too, and we all know what bad people they are. They even spank their women, especially that Basinger gal!!! Oh the humanity...
re: Nortel Rattles Nerveshystericalgirl; Fortunately we've got some late clarification on your VoIP issue. Nortel has released a statement that they are mortified that you are still trying to figure out their story. Therefore they will restate their VoIP strategy just for you. Since you are correct that they don't even have a core IP router, they will remarket the Passport as a "Pure IP" device with value added ATM capabilities. Until such time as that marketing material is available VoIP will be construed to mean "Voice over Itsy-Bitsy Packets" otherwise known to the rest of the world as cells. Please don't tell anybody, and please don't ignore me!!!
re: Nortel Rattles NervesThey say they lead the market in "VoIP", when their main switch line, the Passport, appears to be ATM based. "Voice over packet" is technically a correct description for such a solution, but "VoIP" specifically is not. I therefore cannot figure out what they are really up to at all.
Look into it a little bit more, and you'll see that Passport has POS cards. That should tell you something. Yes, it does do VoIP, not just VoATM. Heck, it can also do VoIPoATM if that's what you want. Voice over Packet encompasses the two.
re: Nortel Rattles Nerves I am still trying to figure out their "VoIP" story. They lack a core IP router, having to do a hasty joint venture with AVCI to get the VZ business, so it appears.
I'm still trying to figure out what core IP routing has to do with VoIP. VoIP is all about the periphery of the entwork. That is where the important services and the money are.
Roth for reasons that always baffled me equated Internet services with optical networking. Nortel shareholders and employees know how dumb that idea is. I would hope that Dunn has more sense than to get into IP routing. It has next to nothing to do wtih Nortel's market.
re: Nortel Rattles NervesDear dljvjbsl: "I'm still trying to figure out what core IP routing has to do with VoIP. VoIP is all about the periphery of the entwork. That is where the important services and the money are."
Don't you believe that the total cost of transit would be lower if VoIP traffic travelled IP all the way through the core? If not, what else should be there and why would that be cheaper?
Who was the CFO during the time period where all these accounting mistakes or irregularities occurred?
Who is now the head of the company?
The answer to both questions is Dunn. The same Dunn that is pulling in US$850k of salary + a gizillion options.
So a few more questions for which I *don't* have answers for:
1. How can the most inept executive get promoted to the CEO position?
2. Why isn't Dunn out there apologizing for the mistake and taking personal responsibility?
3. What does this situation say about Nortel and the character and ability of its CEO?
Very, very sad state of affairs.