Nortel Networks Ltd. in late April fired its CEO Frank Dunn and other senior executives amid a Securities and Exchange Commission probe into its accounting practices; and the Canada-based telecom equipment maker says its earnings for fiscal year 2003 likely will be cut in half.
Nortel says Dunn was “terminated for cause.”
The company named William Owens, a former top-ranking U.S. military officer, president and CEO. Owens, former chairman and CEO of satellite company Teledesic LLC, also served as vice chairman of the U.S. Joint Chiefs of Staff with responsibility for restructuring the armed forces in the post-Cold War era, says Nortel.
Nortel in April also disclosed letting go CFO Douglas Beatty and Controller Michael Gollogly and placing four finance officers on paid leaves of absence, pending further review.
“These actions are an important step in the process of restoring confidence in the company’s leadership and financial reporting,” says Lynton Wilson, chairman of Nortel’s board of directors.
Nortel says previously announced unaudited results for the year ending Dec. 31, 2003, will need to be revised, and the company must restate financial results in each quarter of 2003 and for earlier periods, in 2002 and 2001. The restatements would mark the second time Nortel has restated its financial results. Last year, the company restated financial results for 3.5 years.
Based on an audit committee’s work to date, Nortel says its net income for 2003 would be reduced by 50 percent, and the company would report a net loss for the first half of 2003, compared to a previously announced profit. For fiscal year 2003, Nortel reported net earnings of $732 million.
There should be no impact on prior revenue, or its cash balance as of Dec. 31, 2003.
