Nortel Numbers Face Yet Another Delay

During its previous update on Aug. 19, Nortel shared what it called "estimated limited preliminary" numbers for previous quarters. The company also estimated its first-half 2004 earnings, saying its bottom line was breakeven to earnings of 2 cents a share, on revenue of $5.1 billion. That includes a 2-cent-a-share gain on a contract settlement in South America.

The company again tweaked its opinion of the net impact of the restatement, saying roughly three-quarters of the 2003 earnings reduction will fall in the first half of 2003, not the two-thirds it previously estimated.

As for its business outlook, Nortel reiterated last month that it expects its markets will grow in the low- to mid-single digits in 2004 compared to 2003, and that its revenues will grow faster than the market. The company thinks the restructuring it announced Thursday will reduce operating expenses to 35% of revenues or lower on an annualized basis in 2005.

Though Nortel offered no detailed projections last month, it was clear from the estimated limited preliminary numbers for previous quarters that its conventional wireline gear business and sales of communications equipment to companies continue to be weak. In those areas Nortel has been beset by competition from the likes of Lucent (LU Quote), Cisco (CSCO Quote) and Alcatel (ALA Quote). Meanwhile, the wireless infrastructure operation is looking more solid, as the U.S. cell-phone industry continues its rapid expansion.

Nortel tumbled deeper into its accounting scandal in June after internal audits showed that the company overstated 2003 earnings by $300 million. The phantom profits were central to a round of return-to-profit bonuses that some observers flagged as questionable at the time.

That disclosure was crucial, because it drew a link between the company's oft-questioned executive pay incentive plan and the recent accounting missteps. Analysts and investors say there's a link between the firing of top execs including former CEO Frank Dunn and the bonuses based on bogus profits.

Nortel says it is seeking repayment of the fired executives' bonuses.

Former CEO Frank Dunn has declined to comment on the matter. Dunn's attorney, Tom Heintzman, declined to comment other than to say, "It's before the courts and we will deal with it there."