Nortel Lowers Profit for ’03 by 40%
In a long-delayed report to clean up a multiyear accounting scandal, Canadian telecommunications equipment maker Nortel Networks Corp. slashed its audited profit for 2003 by 40% while reporting Tuesday that a dozen senior executives would repay $8.6 million in bonuses and that five board members would resign.
Profit for 2003 totaled $434 million, rather than the $732 million reported a year ago, the company said. Earnings for the year amounted to 10 cents a share instead of 17 cents. But revenue was revised higher to about $10.2 billion, versus $9.81 billion reported about a year ago.
Twelve senior executives have voluntarily agreed to repay to the company over a three-year period bonuses worth a total of about $8.6 million awarded in 2003, Nortel said, noting that none was directly involved in the accounting scandal.
“These actions are a tangible demonstration of senior management’s commitment to Nortel,” said Bill Owens, president and chief executive.
Outgoing board Chairman L. Red Wilson said the resignations were part of “regular rotation” and “renewal.” Others leaving are L. Yves Fortier, Sherwood Smith Jr., Guylaine Saucier and James Blanchard.
Set to join the board are Richard McCormick, former chairman and CEO of telecommunications company US West, which is now part of Qwest Communications Inc.; Harry Pearce, retired chairman of Hughes Electronics Corp.; and retired General Motors Corp. Vice Chairman John MacNaughton, who is to retire later this month as the president and CEO of the Canada Pension Plan Investment Board.
They are to be nominated for election at Nortel’s next board meeting, expected to be held before May 31.
Nortel issued its new numbers for 2001, 2002 and 2003 in a filing on the website of the U.S. Securities and Exchange Commission.
The initial 2003 figures reported in January 2004 were later found to be erroneous by Nortel’s audit committee -- a discovery that drove the company’s stock price lower and led to the dismissal of CEO Frank Dunn and other executives. There was no indication Tuesday that Dunn and the others fired “for cause” last spring would be forced to repay any funds.
The scandal is linked to accounting methods Nortel used that made 2002 earnings look worse than they were and 2003 earnings look better, bringing executives bonuses linked to the company’s return to profitability.
Securities regulators, the Royal Canadian Mounted Police and the U.S. attorney’s office are conducting probes.
Restated figures for 2001 and 2002 put revenue at $18.9 billion and $11 billion, respectively, with gross profit of $4.3 billion and $3.9 billion, respectively.
