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Nortel Files 2003 Financials

At last. Nortel Networks Ltd. (NYSE/Toronto: NT) has finally filed its 2003 financial reports, so beginning the process that should put its accounting woes behind it (see Nortel Files 2003 Statements).

But of course, there's still the matter of 2004's numbers, which have still to be filed.

News that Nortel had finally stuck to a self-imposed filing deadline sent the vendor's share price up by 15 cents, more than 4 percent, to $3.49 in pre-market trading this morning (see Jan 10 Is Nortel's F-Day).

The 2003 audited numbers as filed with the Securities and Exchange Commission (SEC) are slightly different from the projections provided previously. Total revenues for 2003 are $10.19 billion, compared with the $10.27 billion estimate, while the earnings per share (EPS) for 2003 are $0.10, compared with the previous estimate of $0.12 (see Nortel's Numbers Disappoint).

Available cash at the end of 2003 was $4 billion, as previously estimated.

Nortel CEO Bill Owens thanked his staff, and called the restatement "a monumental task, both complex and demanding." (See Nortel: Financial Stuff Really Complex.) In a company statement he added: "I also want to thank our customers for their consistent support that has allowed us to maintain our business and strong financial position during this time and continue our expansion in critical markets," such as China, India, and the security and Federal sectors.

Some eyebrows might be raised, though, at Owens's claim that Nortel "enters 2005 in a strong position," as many analysts and industry observers believe the company has been damaged by the financial scandal of the past year.

Meanwhile, as Nortel is attempting to close the books on its accounting scandals, many investors appear to remain frustrated that they can't get any forward vision on the company's numbers for 2005. And that's kept the stock stuck in the mud.

In a conference call this morning, Owens wouldn't provide any details of the company's 2005 business plan, but said "2005 revenues will be higher than in 2004." He added that Nortel was working hard to keep costs down and achieve the target gross margins of 40 percent.

Owens said the coming months would see announcements on particular ongoing initiatives. It's a changing market, with "VOIP and converged network" strategies of particular importance. "We're well positioned in next-generation networks. It's going to be good business for us."

Also mentioned in today's release is action regarding the retrieval of executive bonuses that were paid based on now discredited figures (see Nortel Silent on Baffling Bonuses). Nortel says 12 senior executives have agreed to pay back their 2003 "Return to Profitability" bonuses voluntarily over a three-year period. Nortel says it will recoup about $8.6 million.

It also absolves those executives of any blame. "While none of these executives was found to have been directly involved in the inappropriate provisioning conduct, these members of the core executive team share the Board's deep disappointment over the circumstances that led to the restatement."

Owens is quoted in the firms' release as saying, "These voluntary actions reflect the strength of character and quality of leadership of Nortel's core executive team. These actions are a tangible demonstration of senior management's commitment to Nortel."

However, Nortel hasn't given an update on whether it has managed to retrieve bonus moneys paid to former executives such as Frank Dunn, who was sacked as CEO last year (see Nortel Dismisses Dunn).

In the conference call, Owens reiterated that Nortel will "take steps to retrieve bonuses awarded to those engaged in misconduct," and that "appropriate legal action" would be taken if necessary, though no proceedings had yet begun.

Next up are 2004's financials. Nortel expects to release unaudited numbers for the first two quarters of 2004 before the end of January, with third-quarter unaudited financials following soon after. The company is also "working hard" to close the books for the fourth quarter and the full year 2004, but Owens couldn't say when the 10K report for last year will be filed with the SEC.

— Ray Le Maistre, International News Editor, Light Reading

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Krypton_Blue 12/5/2012 | 3:30:07 AM
re: Nortel Files 2003 Financials > It also absolves those executives of any blame. "While none of these executives was found to have been directly involved in the inappropriate provisioning conduct, these members of the core executive team share the Board's deep disappointment over the circumstances that led to the restatement."

>>>>>>

It would be interesting to know how a company absolves its executives with any wrong doing when "they" are in fact responsible for these actions. It is obvious to me that Nortel continues to protect these wrong-doers. Mr. Owens needs to clean up the executive level and a good portion of top directors at Nortel. If he does not do this, sales will continue to slide and its name will continue to be tarnished.

Buyers beware!!!
Machavelli 12/5/2012 | 3:30:06 AM
re: Nortel Files 2003 Financials I love this line.

>>>These voluntary actions reflect the strength of character and quality of leadership of Nortel's core executive team.

This "quality leadership" has provided the following benefits to Nortel stakeholders.

1)"We provide Shareholder Value": Nortel shareholders have seen the share price drop from $120 to $5 over the last 5 years.

2)"We value our employees": The money obtained from laying off 70,000 employees has provided nice bonuses to the executives who fired them. But that wasn't enough, they had to cook the books to provide themselves additional "profitability" bonuses.

3) "We value our customers": They provide them minimal service and product functionality as a result of 70,000 less people working in the company. Wireless customers love Nortel so much, they are all switching over in droves to Lucent, Nokia and Ericson. Optical and Enterprise customers are almost no existent at Nortel.

Mach
dodo 12/5/2012 | 3:30:04 AM
re: Nortel Files 2003 Financials who are they kidding?

Will the reimbursement over 3 years include interest?
How many of the staff who got the proverbial axes saw their hard-earned stock options ( no time to be vested) under water?

NOW WILL RED WILSON AND SOME OF THE BOD MEMBERS DO THE HONOURABLE THING AND SUBMIT THEIR RESIGNATIONS INSTEAD OF CREATING A MAYHEM AT THE NEXT ANNUAL MEETING
Sipster 12/5/2012 | 3:30:04 AM
re: Nortel Files 2003 Financials Only way for nortel to survive is to scarp the management and sell it to a level headed management,
dodo 12/5/2012 | 3:30:03 AM
re: Nortel Files 2003 Financials Correctionafter reading through the various financial news:

Wilson is retiring together with the four other directors who will not stand for reelection : Yves Fortier, Sherwood Smith Jr.,Guylaine Saucier and James Blanchard.

Anyway even Owens is struggling and his credibility has suffered: "Three people close to him say the leadership approach that served him so well in the military may not be suited to the corporate world." Re: Businessweek of 17th January.
Machavelli 12/5/2012 | 3:30:01 AM
re: Nortel Files 2003 Financials I guess Bill Owens wants to close the barn door now that the horse has left.

Nortel annouced the re-installation of an ethics office headed by Susan E. Shepard who previously headed the New York State Ethics Office.

http://www.osc.state.ny.us/pre...

I hope they don't fire her when she starts to do her job like they did with the previous ethics officer in 1999.

Mach
deer_in_the_light 12/5/2012 | 3:30:00 AM
re: Nortel Files 2003 Financials >>>>> Anyway even Owens is struggling and his credibility has suffered: "Three people close to him say the leadership approach that served him so well in the military may not be suited to the corporate world." Re: Businessweek of 17th January.

He must have been the guy running that friendly jail in Iraq, they could use him in Carling ;-)
techoriginol 12/5/2012 | 3:29:58 AM
re: Nortel Files 2003 Financials Once again here is proof that big business is a
friend of government, and that the rich, famous,
or powerful are above the law.

Time and time again we see the same thing. The small investor gets burned, the employees get shafted, the small town crook, shoplifter, or drug possessor gets punished yet the executives like John Roth, Frank Dunns, Wilson, and Enron's Kenneth Lay or other high powered criminals get away with bloody murder.

My father always said "there are two sets of laws". One for the common folk and another for the
rich and powerful. Boy was he right. This is the way it was and this is how it always will be. Government, whether US, Canadian, or anywhere in the world turns a blind eye towards the rich.

12 executives are paying back their bonuses. So what! I lost a dime on the way to work this morning. Am I crying? I also lost my Nortel Job while these wipes were raking in the shareholder dollars.
mcat 12/5/2012 | 3:29:57 AM
re: Nortel Files 2003 Financials The multiple regulators, such as the SEC, Financial Accounting Standards Boards and others in the US and other developed nations need to tear down the inherently instability of the ambiguous accounting categories which have led executives who are motivated by the personal financial gains of high share price, stock options and bonuses to cook the books to extreme levels such that virtually everyone is taken to the cleaners. Post Enron, Worldcom, Nortel and Adelphia, we can no longer justify the old processes which enrich the few at the extreme expense of: employees, shareholders, pension funds and research/development.
As the complexity of corporate organizational structure and financial processes has increased, too many executives have turned away from strategic management in a highly dynamic business environment to accounting gimmicks.
Sadly, I do not trust most of these executives to develop and implement strategies.
BigBrother 12/5/2012 | 3:29:55 AM
re: Nortel Files 2003 Financials I think we should abolish these incremental bonus until the job is done. I have had experienced that people made claims that their projects are on tracks and getting bonus for hitting the milestones but hidding the problems who was going to take over. Then go on to create new projects and screw the company and people all over. The people who took over these problems then had to take the blame. These crooks keep moving up. Sure eventually they will get caught and everyone suffers.
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