Nortel Crashes on Restatement
Nortel (NT) was hammered in Thursday's premarket after the company warned it will probably be forced to restate 2003 earnings, an action that could affect its relationship with lenders.
The possible restatement stems from an investigation by the company's audit committee into a previous earnings restatement, announced in October 2003. Nortel said it will likely have to redo the unaudited results it published Jan. 29.
Those results, in which Nortel reported robust margin expansion and raised its targets for the rest of the year, sparked a 30% rally in the stock, completing a month in which the shares doubled.
They were falling back to earth Thursday, recently trading for $6, down 88 cents, or 12.8%, on the Instinet premarket session.In the Thursday release, Nortel said it is examining the "establishment, timing of, support for and release to income of certain accruals and provisions in prior periods." It wasn't more specific about the problem. The company noted that an inability to file its 10-K by March 30 puts it out of compliance with some debt agreements, including indentures covering $1.8 billion of notes issued by its main subsidiary Nortel Networks Limited (NNL), and another $1.8 billion of convertible bonds. "The company believes that the public debt securities will not become due and payable as a result of a restatement and the related delay in filing the 2003 Form 10-K. However, if an acceleration of the Company's and NNL's debt securities were to occur, the company and NNL may be unable to meet their respective payment obligations with respect to the related indebtedness," Nortel said.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV