Nortel Tries to Break With Troubled Past

Nortel (NT) minced few words Wednesday as it put an end to the turbulent Frank Dunn era.

The Canadian telecom gearmaker shocked Wall Street by firing CEO Dunn and two top finance officers, citing their lack of accountability. Dunn was immediately replaced by Nortel Director and former Teledesic Chief Bill Owens.

Industry observers say the rare "for cause" dismissal indicates the board wants a clean break with its troubled past. The move also betrays a strong conviction on the board's part that the three executives were at the center of Nortel's accounting scandal.

Now, looking back, analysts and industry watchers say there may have been more than coincidence at work in the questionable accounting that took place on Dunn's watch and the company's sudden banishing of red ink early last year. Interestingly enough, the company's splash into the black happened just as Nortel execs stood to collect on a $50 million return-to-profit bonus.

"It says a lot when the new guy comes in and says we have a big problem and we are cleaning it up," says John Gavin, a financial sleuth with finance newsletter SEC Insight, referring to Dunn's elevation to chief of Nortel after the company expanded too fast during the boom. "Then they basically threw Dunn under the bus."

"You don't fire people for cause lightly," says a Wall Street analyst who asked not to be named. "You've either got a long record of incidents or you've caught them with their hand in the cookie jar."

It's hard to put Dunn anywhere but center stage in the bookkeeping bloodbath in Nortel's home base of Brampton, Ontario.

Dunn was named CFO in 1999 by former chief John Roth, and later succeeded Roth as CEO in 2002. Dunn helped Nortel open "a new chapter" at the start of 2003 by claiming the company's restructuring was complete and it would return to the black by the middle of that year.