Nortel Networks’ eagerly anticipated 2003 audited financial results, released today, revealed a 40 per cent cut in net profit from the telecommunications equipment maker’s previously reported 2003 financial results.
Nortel now says it made US$434 million, or 10 cents a share, instead of US$732 million, or 17 cents a share. Nortel also restated its 2002 results to show a loss of 78 cents a share and its 2001 results to a loss of US$8.08 s share.
Late in 2003, Nortel revealed it would be restating its results for 2001, 2002 and 2003, after an internal review revealed accounting irregularities.
While Nortel’s reporting woes certainly hurt the company in the financial markets, they probably didn’t have a big impact on Nortel’s customer relationships, said Mark Quigley, an analyst with telecommunications research firm the Yankee Group Canada.
“From a product perspective, from a service perspective, the company continues to deliver,” Quigley said. “They continue to deliver cutting-edge products and support them.”
Once a high-tech high flier, Nortel’s fortunes have plummeted in recent years. Last August the company announced it would cut approximately 3,500 jobs, or 10 per cent of its work force. And the firm’s once lofty share price, which hit a high of $124.50 in 2000, dropped to 67 cents in 2002, before slowly climbing back up. Nortel shares rose seven cents to $4.18 on the Toronto Stock Exchange in early trading on Tuesday morning, after the restated earnings results.
Nortel’s restatement has taken longer then the company expected, said William Owens, Nortel’s president and CEO.
“The restatement process has been a difficult and demanding experience for us,” he said.
More than 600 employees working full-time and $100 million in company resources went into the internal audit, Owens noted.
In an effort to restore some of the investor and customer trust Nortel may have lost due to its accounting problems, the firm appointed its first-ever chief ethics and compliance officer, Susan Shepard. Shepard has previously served on the New York State Ethics Commission.
Nortel also revealed that five company directors, including chairman Lynton Wilson, won’t stand for re-election.
Owens said Nortel should have its unaudited results for the first two quarters of 2004 available before the end of this month. Results for Q3, 2004 should be available soon after that. Owens said he could not commit to a specific date for final 2004 numbers.
Canadian and U.S. regulators, as well as the Royal Canadian Mounted Police, are still investigating the circumstances surrounding Nortel’s financial reporting.