Earnings reports

Nortel CFO Out

Nortel Networks Corp. (NYSE/Toronto: NT) announced this morning that it has bounced its top financial officers, following complications related to a financial audit of past results (see Nortel Replaces CFO).

Nortel said in a press release that Douglas Beatty, the company's incumbent chief financial officer, and Michael Gollogly, the incumbent controller, have been placed on paid leave of absence, pending the completion of an independent review by Nortel's audit committee.

Nortel has named William Kerr as interim CFO and Mary Anne Pahapill as interim controller.

The news is likely to further rattle Nortel investors who heard last week that more auditing and restating of Nortel's earnings was at hand (see Nortel Rattles Nerves). This has also put the brakes on Nortel's stock, which more than tripled in value in 2003. In pre-market trading this morning, Nortel shares were trading down $0.37 (5.75%) at $6.06.

"The stock should really be getting smoked -- this is not a positive thing," says Kenhee Lee, principal of Q Capital Advisory Co.

Where this ends is not exactly clear. Nortel announced last October that it would be restating its results, and that has now come under review by the audit committee. Nortel announced last week that it will likely need to revise its results for certain quarters and the year ended December 31, 2003. It will also need to restate its previously filed financial results for one or more earlier periods.

In other words, it's restating the restatements.

Mr. Kerr originally joined Nortel Networks in 1994 as controller, according to the company. Before leaving Nortel in 2001, he held a number of senior positions in the company's finance organization.

Since joining Nortel in 1999, Ms. Pahapill has held a number of positions in the company's finance organization, including assistant controller and, most recently, assistant treasurer, according to Nortel's release.

Nortel said that today it will file with the Securities and Exchange Commission (SEC) Form 12b-25 Notification of Late Filing, delaying the report of its 2003 results beyond March 30, 2004.

— R. Scott Raynovich, US Editor, Light Reading

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fbgboy 12/5/2012 | 2:15:06 AM
re: Nortel CFO Out My stomach is starting to hurt. To know what that means see the book - Zen and the art of Motorcycle Maintenance. I was waiving my arms to everyone that when it hit $5 to go back in. This is not looking good.
dodo 12/5/2012 | 2:15:05 AM
re: Nortel CFO Out May be he should return all the year-end compensation that he has received so far for his ACHIEVEMENTS.
jgh 12/5/2012 | 2:15:05 AM
re: Nortel CFO Out Let's see, Frank Dunn was the previous CFO and all these accounting problems are occurring under his watch.
He was made CEO to lend credibility to the Nortel financial issues that occurred in 2001-2002.
Where is his paid leave of absence.
With the problems at Worldcomm and Enron intertwined with the CFOs at each company, its time for Nortel to bring anew CFO from outside Nortel.
Milano 12/5/2012 | 2:15:04 AM
re: Nortel CFO Out So what did Dunn know, and when did he know it??

Nobody yet is calling for Dunn to go, but this is a serious strike against him. If the restatement is extensive, it will be time to finish the transition and bring a strong outsider. With the results improving (with or without restatement), it should be easier to attract a turnaround CEO than it was when Roth resigned in 2001.

LightMan 12/5/2012 | 2:15:03 AM
re: Nortel CFO Out the word on the inside are the numbers will actually be better than reported. While unfortunate they were off, it is a positive.

dodo 12/5/2012 | 2:15:02 AM
re: Nortel CFO Out I find that odd that they will "suspend" both the CFO and the controller with pay if the numbers will actually be better.They did not do it last October!
And yet it took less than 2 months to restate from 2000 to q'2 2003.
materialgirl 12/5/2012 | 2:15:01 AM
re: Nortel CFO Out Why is anyone questioning whether Dunn should go? He can't run the company properly. He has presided over one mistake after another. This is not the performance that deserves big bucks.

These guys know more than they tell you. They can always lie faster than you can detect. You are acting like a bunch of saps. "Fool me once, shame on me, fool me twice, shame on you." It is this permissiveness that allows frauds like those at Lucent (under McGinn), Qwest (under Nacchio), Enron and Worldcom to manifest. Zero tolerance is the only rational strategy.
Machavelli 12/5/2012 | 2:14:55 AM
re: Nortel CFO Out Frank Dunn must go!

He has no vision, no knowledge of the telecommunications industry and no knowledge of corporate financial reporting procudures (despite his background).
Most Nortel employees and most stockholders have no faith in him.

They should stop promoting deadwood from within and bring in some fresh blood.

Either bring some one with the wisdom of Jean Monty (who turned around Nortel after years of stagnant performance, only to have it destroyed after Roth and Dunn took over).

Or bring some youthful energy like Krish Prabhu (formerly of Alcatel and current CEO of Tellabs).

Milano 12/5/2012 | 2:14:53 AM
re: Nortel CFO Out Who are the insiders that dumped the stock just before the announcement of the restatement? How convenient. Looks like Nortel still has a way to go to clear its name. Dunn is tolerating a lot of crap still.

As before, it's just a scam to transfer money form a lot of small investors to a happy few living under Dunn's umbrella.

whyiswhy 12/5/2012 | 2:14:51 AM
re: Nortel CFO Out FBG:

Did you really think you would make it to your 23rd birthday?

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