Nortel Networks Corp. has fired its CEO Frank Dunn and other senior executives amid a Securities & Exchange Commission probe into its accounting practices, and the Canada-based telecom equipment maker said today its earnings for fiscal year 2003 will likely be cut in half.
Nortel said Dunn had been “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 Teledesic LLC, a satellite communications company, 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, according to Nortel.
Nortel today also disclosed letting go CFO Douglas Beatty and Controller Michael Gollogly and placing four finance officers working during the periods under review on paid leave 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,” said Lynton Wilson, chairman of Nortel’s board of directors.
Nortel said previously announced unaudited results for the year ending Dec. 31, 2003, will need to be revised, and the company will need to restate financial results in each quarter of 2003 and for earlier periods, including 2002 and 2001. The restatements would mark the second time Nortel has restated its financial results. Last year, the company restated financial results covering 3 ½ years.
Based on an audit committee’s work to date, Nortel said it anticipates 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.
Nortel said it did not expect a material impact on prior revenue, or its cash balance as of Dec. 31.
