New Restatement for Nortel

The company's adjusted fourth-quarter bottom line is worse than it had forecast.
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Nortel

(NT)

, with its third adjustment in two months, has found even more bookkeeping errors, taking its restatement total for the past three years to nearly $1.5 billion.

The Canadian telecom gearmaker also reported an adjusted fourth-quarter bottom line that was worse than its recently lowered guidance, thanks to shrinking gross margins. In a filing with the

Securities and Exchange Commission

late Friday, Nortel said it lost 2 cents a share, before items, on sales of $2.99 billion in the latest quarter. The company lost 1 cent a share, on a pro forma basis, and had revenue of $2.5 billion in the year-ago period.

Last month, Nortel issued a preliminary fourth-quarter report that called for an adjusted profit of 4 cents, but in the final report, Nortel's gross margin slipped to 39.4% from the 43.3% the company had targeted. Once it factored in various items, including costs of $2.47 billion to settle shareholders lawsuits, Nortel lost $2.30 billion, or 53 cents a share, in the most recent quarter.

The filings also included restated financial reports for the past three years that erased $1.48 billion in sales and cut net income by $531 million. Last month, Nortel had said it would restate its results to eliminate $1.2 billion in misbooked sales.

Investors had hoped Nortel was making progress rebuilding in the wake of accounting scandals and sales slumps. After two restatements and the departure of its top management, Nortel was expected to have turned a corner with

Motorola's

(MOT)

No. 2 executive Mike Zafirovsky at the helm. But the latest adjustment now marks the third round of bookkeeping corrections for the company.

In October 2003, Nortel's internal audit turned up $900 million worth of accounting mistakes it needed to correct. That discovery launched several investigations into the company's bookkeeping, which later uncovered $3.1 billion in revenue-accounting errors dating back to 1999.

Those bogus numbers, as it turned out, helped trigger bonuses for executives and employees. Nearly the entire senior management and most of Nortel's board have been replaced in the wake of the

bonusgate scandal.

As a result of the newest accounting discoveries, Nortel says it will miss its first-quarter 2006 financial filing deadline. Still, the company expects to have the report complete by June 5.

The accounting mixup has put Nortel in default of a $1.3 billion credit agreement with Export Development Canada. Nortel is seeking a waiver from EDC, which has a history of leniency with the troubled gearmaker. The company says it will hold a conference call on May 16 to provide a business update, which will likely be the release of its preliminary results for the first quarter that ended in March.

Nortel's shares sank a penny to $2.65 in early trading Monday.