Nortel Wields Ax Again

Nortel (NT) wowed Wall Street Thursday with yet another decisive swing of the ax.

Taking aim at what it suggests was a pack of crooked execs, the Brampton, Ontario, telecom gearmaker fired seven more top financial officials. The move is the latest development in an accounting scandal tied to the company's overstated first-half 2003 earnings. Thursday's dismissals bring the book-cooking toll in Nortel's executive suite to 10.

The questionable-accounting crowd wasn't the only victim of Nortel's push to clear the decks, though. The company said it would slash 3,500 jobs, or 10% of the workforce, in an effort to bring costs in line with soft sales. Nortel also rolled out what it has called "estimated limited preliminary" first-half results in a move to catch up with years of unfiled financials.

Cheering a long-absent sense of broad progress, investors pushed Nortel shares up 8% in early afternoon action. But beyond its characteristically sharp edge on costs -- the company has seemingly been in one stage of restructuring or another for around four years now -- Nortel offered little evidence that it's got a handle on a tough market for telecom gear.

"Overall, there were no major surprises," says CIBC World Markets' analyst Steve Kamman, explaining Wall Street's bullish turn on a stock that is down more than 50% from this winter's prescandal highs. "It's clear that Nortel will be shuffling people around and restructuring for the next six months." Kamman has a neutral rating on the stock, and Nortel is a CIBC banking client.

Nortel rose 29 cents to $3.89.

Bonus Babies

The most dramatic development, aside from the well-telegraphed staff cuts, came in Nortel's decision to fire an additional seven finance officers and vow to recover their potentially ill-gotten bonuses. A review of the books showed that previous management had fluffed up earnings by about $300 million last year, with three-quarters of that sum appearing in the first half of the year. Not so coincidentally, perhaps, Nortel last year began sharing with workers a pool of more than $50 million in bonus money riding on the company's return to profit.