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Nortel to Restate Its Earnings

October 24, 2003|From Reuters

Nortel Networks Corp., one of the world's largest telecom equipment makers, posted a surprise third-quarter profit Thursday but set nerves on edge with news it would restate key financial data going back to 2000.

Brampton, Canada-based Nortel said the restatement of earnings from 2000 to the first half of 2003 would eliminate about $900 million of liabilities and reduce losses from 2000 to 2002.

But it was uncomfortable news for investors, who sent Nortel shares down 24 cents in after-hours trading. They fell 21 cents to $4.44 in regular New York Stock Exchange trading.

"Nortel Networks strives for the highest level of integrity and transparency in its business operations and financial reporting," Nortel Chief Executive Frank Dunn said.

"We are committed to working to identify the causes of these mistakes and to implement the appropriate measures to ensure that these problems do not occur in the future."

Nortel said none of the adjustments was expected to affect its cash balance of future business operations.

Chief Financial Officer Doug Beatty said much of the restatement stemmed mainly from taking larger-than-needed accruals and provisions as tumbling sales forced it to cut about 60,000 jobs, or two-thirds of its staff, and scale back from more than 700 sites to about 250.

Analysts and fund managers said that Nortel's explanation seemed plausible given its combined loss of $31 billion in 2001 and 2002, but that investors were on edge after corporate scandals such as Enron Corp. and WorldCom Inc.

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