Nortel Still Can't Crack the Books

The telecom giant delays yet again the full report on its accounting missteps.
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Nortel (NT) says it will blow another financial filing deadline, forcing it to plead again with its creditors for a waiver.

The Brampton, Ont., networking giant says its nearly yearlong bout with book-cleaning is almost complete. Still, the company won't be ready to file financial restatements by Oct. 31 as planned. As a result, the company won't be able to file third-quarter 2004 results by the mid-November deadline.

Nortel now expects it will be able to provide restated financials for 2003 and the first two quarters of 2004 by sometime in the middle of next month.

The filing delay once again puts Nortel in violation of some lending agreements. The company says it is seeking another waiver from Export Development Canada. Nortel has a $750 million line of credit with EDC, which has granted at least two prior waivers.

Nortel must now send a delay-in-filing notification to the

Securities and Exchange Commission

, since its official third-quarter 2004 results won't be available by the November deadline.

In a break from prior delays, Nortel isn't blaming the volume and complexity of the audit this time. Instead it says its "continuing objective is to arrive at a full understanding of the facts and circumstances that gave rise" to the bookkeeping blunder.

The company said in a press release Wednesday that two-thirds of the net income reductions taken in 2003 will affect the first half of the year. Nortel had previously put that figure at three-fourths. Nortel adds that those net income reductions will affect continuing operations and discontinued operations on an equal basis. Previously, the company had said the reductions would mostly affect continuing operations.

To some observers, the latest delay points to a big problem at Nortel with accountability.

"The issue here isn't the numbers anymore," says one Wall Street analyst who asked not to be named. "The real issue at this point is management's credibility." The analyst has a neutral rating on the stock.

Nortel tumbled into this accounting scandal early this year after internal audits revealed that the company had overstated 2003 earnings by $300 million. Those bogus profits were central to a round of return-to-profit bonuses that

a few observers flagged last year.

The disclosure was crucial, because it drew a link between the company's controversial executive pay incentive plan and the recent accounting missteps. The link became clearer after the company fired its top execs, including former CEO Frank Dunn. In August, Nortel fired an additional seven executives for their role in fluffing up the company's earnings, bringing the toll in the book-cooking scheme to 10.

Nortel has also announced that it would cut 10% of its companywide staff as it attempts to align costs with sales.

On Wednesday, Nortel slipped 11 cents to $3.28.