Nortel Review Far From Over

Nortel(NT Quote) said it still has no idea when the review of its previously issued financial statements will be finished, warning that the painstaking process is being carried out over "thousands of accounting entries in ledgers and sub-ledgers across geographic regions over a number of years."

Nortel reiterated that the review will cut 2003's previously reported earnings in half and result in a loss, rather than earnings, over the year's first two quarters.

"We are making progress toward completing the restatement of our financials, but this is a complex process and there is significant work yet to be done," Nortel said. "This has been a very challenging time for the company, our investors, customers and employees. We will get through it in good shape."

The troubled telecom said it can't estimate when the review will be done, although it does know that it won't be before the end of the current quarter. The restatement is part of a financial debacle that already cost CEO Frank Dunn his job and taken the stock from around $8 in early 2004 to a recent $3.85. Last month, the company said it had received a subpoena from a grand jury conducting a criminal investigation in Texas.

The company is trying to sort out the restatement of each 2003 quarter and for earlier periods, including 2002 and 2001. It's currently up to the third and fourth quarters of 2003.

"The process to complete the full year 2003 and interim 2004 financial statements and the restated financial statements requires significant time due to the volume and complexity of the work involved, including the review and confirmation of supporting documentation and circumstances for thousands of accounting entries in ledgers and sub-ledgers across geographic regions over a number of years," it said.

The company made some vaguely positive statements about the current business climate, while at the same time warning that it could say nothing specific about the first quarter, other than its cash balance continues to be about $3.6 billion.

Nortel "continues to see good business momentum reflecting continued customer support for its strong portfolio of next-generation network solutions," according to a release. It reported "continued success" in various voice-over-Internet protocol categories; "advances" in next-generation wireless products; and "gains" in service provider voice-over-packet products.

"The company continues to expect that the percentage growth in the overall capital spending by our customers will be in the low single digits in 2004 compared to 2003 and expects to grow its revenue faster than the market," Nortel said.