Nice Work, Mr. Currie

Currie
After two years as Nortel’s CFO, Peter Currie has decided to resign – a decision that has to be a surprise to many Nortel watchers given Currie has played an instrumental role in the company’s rebound from an accounting scandal, and he seemed to be an integral part of CEO Mike Zafirovski overhauled senior management team.
Truth be told, Currie’s decision to do a third stint at Nortel (he worked there from 1979 to 1992, and 1994 to 1997) struck me as a little strange. It was like he felt an allegiance to Nortel at a time when the company needed all and any help it could get, so going back to Nortel for a third kick at the can seemed as much a gesture of goodwill and doing the right thing as a career move after he missed out at the top job at Royal Bank of Canada.

An interesting comment on Currie’s departure comes from UBS analyst Robert Dennison, who believes it could signal “a more acquisitive Nortel. We believe his departure is likely due to Nortel looking to be more aggressive in pursuing growth via M&A given the likelihood that most restructuring initiatives and internal financial controls are likely in place,” he said in a research report. Dennis rates Nortel as a “neutral” with a price target of $26.

Technorati Tags:

Advertisements

5 Responses to “Nice Work, Mr. Currie”

  1. Realist Says:

    from:
    http://www.cbc.ca/news/background/nortel/

    (there’s more, these are just excerpts)

    Internet bubble burst in 2000, Nortel went from poster boy to whipping boy.

    Nortel moved to outsourcing much of its production, resulting in the closure of 18 of the company’s 24 plants.

    Nortel’s growth was in part based on acquisitions. In 2000 alone, it bought 11 companies for a total of $19.7 billion US.

    And then the bubble burst. Nortel’s sales plunged by 50 per cent. The value of the companies Nortel had bought collapsed too. In less than a year, firms that Nortel had paid billions for were worth just hundreds of millions.

    Roth – named Canada’s “Business leader of the year” in 2000 – stepped down as president and CEO in early October 2001, replaced by Frank Dunn. The company announced another 10,000 job cuts and a third-quarter loss of $3.47 billion later that month.

    By the end of 2001, Nortel had just 45,000 employees – half the workforce it had begun the year with.– a loss of $27.3 billion US.

    And 2002 brought more misery, and mere glimmers of hope. In February 2002, the company’s chief financial officer, Terry Hungle, resigned following allegations that he broke the company’s trading rules in some of his personal stock transactions.

    In subsequent months, Nortel warned that business was still not picking up; its long-term debt was downgraded to “junk” status by both Moody’s Investors Services and Standard & Poor’s; and by October, its shares had plunged to just 69 cents – more than 99 per cent lower than where it had been barely two years earlier.

    More job cuts brought the company’s work force to 35,000 by the end of 2002, about one-third of the work force Nortel had at the start of 2001.

    In January 2003, Nortel reported better-than-expected results
    its stock price began to rally, topping $6 as it signed billions of dollars in new deals
    and in January 2004 it announced its first annual profit since 1997.

    But in March 2004, Nortel warned that it would delay filing its audited financial statements for 2003 and would likely make more financial restatements, sending the stock plunging. The company then put its chief financial officer and controller on paid leave. The stock sank again.

    Both the U.S. Securities and Exchange Commission and the Ontario Securities Commission began investigations in April 2004 of Nortel’s earnings restatements.

    Then on April 28, 2004, Nortel fired its top executive, Frank Dunn, and the two executives who had been on paid leave, and put four more on paid leave. It said a preliminary review suggests its calculated profit for 2003 will have to be reduced by 50 per cent.

    In May 2004, the U.S. Attorney’s Office in Dallas launched a criminal probe into NortelThe Ontario Public Service Employees Union Pension Trust filed a class-action lawsuit
    Another criminal investigation into Nortel’s accounting practices, this time by the RCMP, began in August 2004. Days later, Nortel cut 3,500 jobs, about 10 per cent of its workforce, and fired seven more people from its finance department Nortel later announced the job cuts would total 3,250, with 950 of those jobs coming from Canada.

    Its 2004 financials, reported in May 2005, showed that the company actually lost money that year – $51 million US. Revenues fell 3.6 per cent from 2003. CEO Bill Owens said he wasn’t happy with the results

    In March 2006, Nortel once again announces its financial filings will be delayed and it will restate financial results for 2003, 2004 and the first nine months of 2005.

    In March 2006, Nortel once again announces its financial filings will be delayed and it will restate financial results for 2003, 2004 and the first nine months of 2005.

    In May 2006, Nortel Networks warned investors that its first quarter revenues would be flat or down slightly, and that it would post a slightly higher loss than in the first quarter of 2005.

    Just weeks later, CEO Zafirovski announced a further restructuring. The changes include the elimination of another 1,100 jobs, the creation of two new “centres of excellence,” the conversion of the company’s pension plan to one that doesn’t guarantee a specific pension benefit, and a trimming of other retirement benefits. The company hopes to save $175 million US a year by 2008.

    On Dec. 1, 2006, the company went ahead with a 1-for-10 stock consolidation. Its shares jumped 10-fold in price to over $24, but the number of shares plunged from 4.33 billion to 433 million.
    ______________________________________________________________________________________

    NOTE: February 6th, 2006 the CFO departs following the ethics officer’s departure a few weeks earlier

  2. Realist Says:

    Update:

    February 7th, 2006, Nortel announces another 2,900 job cuts and exporting another 1,000 jobs.

    Fits in well with the course of events above doesn’t it… now what’s coming next.

  3. zxcv Says:

    Give it a rest Jamezz.

  4. Apple Says:

    given the likelihood that most restructuring initiatives and internal financial controls are likely in place,” he said in a research report. Dennis rates Nortel as a “neutral” with a price target of $26.
    =============
    re
    I am a careful NT watcher and I can tell you that such statement is too optimistic.
    I deducted that the opposite is the truth.
    Those material weaknesses are still there, In the resigning note CFO said he strengthened them but he did not say he fixed them.
    Their last audited report 10-k 2005 on page 20 talks about those weaknesses being there and causing reported numbers being in-accurate and reports being filed not timely
    http://www.nortel.com/corporate/investor/reports/collateral/nnc_annual_report_2005.pdf
    focus on
    We and our independent registered chartered accountants have identified a number of material weaknesses related
    to our internal control over financial reporting and we have concluded that our internal control over financial
    reporting was ineffective as of December 31, 2005. These material weaknesses remain unremedied, which could
    continue to impact our ability to report our results of operations and financial condition accurately and in a timely
    manner.

    If you know history of delayed audited reports you should remember that Nortel delayed and restated
    10-K 2003 report
    10-K 2004 report
    10-K 2005 report
    with such history of false revenues and profits you should be cautious to expect NT to file 2006 on time.
    2005 was the year of Peter C. He was the one who had to announce Q2 2005 Triple Profits. Mark, you were one of the first to question such statement _report. You were right. There was no profit in Q2 2005. Nortel restated it into Q2 2005 loss.
    Here we are, yet another financial year ended, auditors are browsing the books /Q: who is the audit company?/it’s getting late for the reporting and who feels responsible for that?
    I think Peter did not want to go trough that process again. Delaying and restating….He took the blame on him.
    All the telecom vendors have already reported.
    If Nortel were ready to report, if auditors signed the books we would know the reporting date.
    Mike Z stated the obvious thing, we expect Nortel to report before March /SEC requirement/
    Expectations are one thing, Nortel’s reality is another.
    Preliminary Q4 numbers was a hot air blow to lift NT stock up and cool down worried investors and customers.
    Audited numbers will show what revenues, what profits_loss from operation, what cash…
    You should pay attention to revenues as Nortel tried it before, removing revenues from previous years and reporting them in future quarters declaring revenue growth.
    If you believed Nortel’s restatements, you should be aware of $3.5 bill removed from the years 2003 and $1.5 bill removed last year from 2005. Nortel claims they were legit revenues just recognized too early.
    Even if that was true /I don’t believe such thing in accounting/ the large pool of removed revenues is crossing the time line and is dumped into current quarters; large enough to show growth when if fact there could be the opposite process happening.
    Even $1 bill removed from the past and hidden in the current quarters make huge difference in comparing YearOverTear revenues numbers.

  5. Observer Says:

    A CFO leaving a company raises flags, understandably. To lend benefit of the doubt, Currie also had a lot to deal with.

    For example, Nortel beefs the books with its largest asset being an expiring tax credit they refuse to write down. This is misleading for a company looking to clean up accounting and struggling to regain credibility.

    Nortel also chronically overstates, never understates, while losing money is the norm than exception. They cut product, staff, sell assets, their business, lose on acquisitions like PEC and others as partnerships like Putian or Huawei don’t materialize juggling precious cash as customers/peers merge or they lose on other gambles like BSNL, etc., we can go on forever as their woes and outlook is endless.

    Moving money from past periods where they are no longer needed to pad future periods with no cash impact raises red flags. Where there is one visit to the confessional under these circumstances, another is a given they say. Currie must have been in therapy.

    The first time CEO with less than stellar credibility regarding his MOT contracts Nortel paid a premium for, downplayed estimates that doubled, adding an unprecedented no guarantees, including post accounting scandal years 2004/5. The CEO also downplayed further inquiry/penalty claiming work was already done, even though these revisions were new. The latest revisions literally increased by the week to suddenly stop at $1.48B. How can there not be more? Who is the figurehead for a companies numbers, the Chief Financial Officer? Good old time insider Mr. Currie?

    Seemingly liquid, even cash is in a precarious position. Nortel warned they made no provisions for fines that may reflect the gravity of one of the largest fraud settlements. Maintaining declining cash was assisted via printing a whopping $2B in high interest 10.5% Nortel paper to further effect already negative cash flow and these fines won’t accept paper. Mr. Currie certainly must have had his hands full.

    Bad enough they keep bonuses for a year worse every time counted, board members are on the audit committee and approve lottery management severances as they cut staff and pension perks. Currie was the CFO in the throws of this mess…

    Wait, there is more, 2006 optimism was moved again too, to 2008 now. They extend the repair of controls 2008 too when $1.8B debt is due (currently at 4.25%), they can’t collateralize this time like creditors demanded last time and bonds now require pensions be listed of which they have the largest in Canada now that Alcan has cleared itself. It is endless… who knows why Mr. Currie left… but there are certainly plenty of reasons I would imagine.

    Others departed too so he is not alone, like the ethics officer, auditors.. I wonder if he will get as cool a severance like Mr. Owens, or their Chief Legal Officer one of the largest bonus recipients… I know he paid it back but did better on options anyways, like the ones NT accelerated for Mr Owens, with board members approving pay practices…. lovely, has anything changed? So in this sense, it is surprising he leaves. =)

    Will we ever know the real reason any more than what for “cause” means, how much the Flextronics amendments were, how much less they got for UMTS, or their very ongoing numbers for that reason… Will we ever know anything really, like why did Mr. Currie or the auditors depart, better we guess than get an explanation from Nortel I fear.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s


%d bloggers like this: