Yet Another Restatement?

You had to know it was only a matter of time before Nortel restated its results again, right? Nortel and its principle operating unit, Nortel Networks Ltd., will restate their financial results for 2004, 2005 and the first nine months of 2006, and will make adjustments to periods prior to 2004. So, what’s up? Apparently, it has to do with third-party errors related to employee benefit plans and – surprise, surprise – timing errors on the recognition of revenue.

“This restatement has no material impact to our fourth quarter 2006 operating expectations or performance, ” said CFO Peter Currie, who’s leaving the company next month after abruptly announcing his resignation a few weeks ago. “During 2006, we have implemented significant remedial measures and other actions to address our internal control weaknesses. This has resulted in a substantial reduction of control weaknesses as at year end and represents a major milestone in our journey toward consistent, reliable and timely financial reporting.”

While the restatement is relatively minor, it’s certainly not a positive sign for a company that appeared to be gaining its footing again and more confidence from investors. Nortel said it expects revisions to its previously reported 2006 nine month results that will boost revenues and improvements in net earnings by about $24 million and $15 million, respectively. Its 2005 results will decline by $28-milion while losses will climb by $87-million. Revenue in 2004 will rise by $33-million while the net loss will increase by $42-million.


20 Responses to “Yet Another Restatement?”

  1. AnotherXNortel Says:

    Somebody needs to start a fund so they can buy some calculators.

  2. jayemmay Says:

    This is unbelievable! Unfortunately, it’s true. There is a famous French saying “Plus ca change, plus c’est la meme chose”. The more things change, the more they stay the same. Amazing.

  3. Rick Says:

    I used to work at Nortel. I remember what a great place it was to work. It was a pleasure to work with such fine people. It is so sad to see what has happened to Nortel. Unfortunately, the folks who put Nortel in this position are still running the company. This will happend again….and again…and again. Crooks will be crooks.

  4. blogger Says:

    Did you mean “principle operating unit” or “principal operating unit” or “principled operating unit”? I’m glad to see you admitting that Nortel is at least principled now.

  5. Observer Says:

    endless just comedy of events in this saga, chalk up yet another…

    I wish I knew more about how they can possibly just keep on doing it… it’s beyond me. I thought the benefit of a doubt would have worn thin long ago.

  6. many Says:

    What a bunch of maroons. Z and his cronies are just the latest bunch of thugs. Nortel was never a good or ethical company, they always rode the coattails of BNR innovation and success.

  7. Anonymous Says:

    I think you could effectively argue that the continued restatements amount to fraud. Nortel got a $2B loan last year based on a bond sale to Citigroup and the Canadian government based on the books being clean last February. As revenue keeps getting moved forward in time, it means that the company had been bleeding more cash than previously stated and had gotten extensions on loan guarantees and cash from the sale of bonds based on financial statements that were false. The bondholders should be irate at the latest restatement and will likely escalate the interest payments on existing bonds. At this point, is there any gurantee that the next financial statement won’t be convieniently restated next year at this time ? Hopefully (for Nortel’s sake) the financial and investment community doesn’t use this restatement to break Nortel financially for good.

  8. Moneytalks Says:

    I recently asked a friend of mine how she could handle the stuff at work now that she could retire early? Her response? The entertainment value! Well at least it is entertaining………..

  9. The psychiatrist Says:


    It’s rather amazing that the majority of your blog followers are either imbittered ex or current Nortel employees,or spiteful shareholders.

    Either way it seems Nortel can’t win- they try to implement a much needed transformation right through the entire organization and as such have spawned a whole crop of disgruntled employees,,because for once they will have to work with intensity as opposed to yapping it up at the water cooler,or wandering around through the corporate halls undecided if they want to go for a workout at the gym and avoid facing the daunting task of returning to their post to resume where they left off at the water cooler.

    Sooner or later they will have to wake up to the new reality and realize that Nortel is no longer the haven for high wages and lax work ethics if they want to maintain their employment with Nortel.

    So many negative responses about all subjects with Nortel ,calling for Mr.Hackney’s termination simply because the ones who got too comfortable didn’t like having their feathers ruffled and thought that the recent incident with that young woman would be a perfect opportunity to vent their frustration towards the necessary changes that Mr.Hackney is forced to implement if Nortel is to continue to exist.

    Corporate culture change will not be easy,but the sooner each employee recognizes that they need to look in the mirror and realize that change must start from them all the way to the top echelons of managment, otherwise mediocrity will be the final nail in Nortel’s coffin.

    BTW- in my opinion the Zman gets full cedit for handling the latest restatement issue, setbacks were only a matter of time as a result of using a fine toothed comb to repair the sad state of affairs left behind by previous finance personnel.

  10. many Says:

    Oh please. Nortel has had an honesty problem since the days of Dr. Franenstern. The management has been top heavy, arrogant and lacking vision. The nortel-bay merger was a failure because the wellfleet-synoptic merger was a failure. Accounting during the roth years was at least as corrupt as it has ever been.

    Hackney is another pissed-of, immature college boy with anger management problems. The bottom line is that the culture that needs changing is the management culture. All the facts that support this. Yet here we are again.

    Don’t blame the workers who were trying while management played golf and made bad deals.

  11. 2Brnot2B Says:

    To the psychiatrist.

    I you worked at Nortel in the last 6 years, have you gone thru what the Nortel employees have gone thrue in the last six years. If you haven’t then I don’t know how you can talk about the employees who have gone thrue it.

  12. gladIamgone Says:

    hmmm, The psychiatrist needs to see a psychiatrist…….quickly

  13. not laid off yet employee Says:

    Have you been to any Nortel sites lately? There are no water cooler or hallway discussions. That was the old Nortel culture, and anyone who is disgruntled or known to spread rumors has been laid off or has left the company. I think most, if not all employees want Nortel to turn around and to be successful so we can make some $$, but how many of us were involved in the accounting scandals. Comments made here are in response to “Yet another restatement”…. Employees hear this news at the same time as you do, and are clearly not trilled with it. This blog gives folks a much needed way to vent. If you vent at the office you will likely be laid off in the “next round”.

  14. just a nortel employee Says:

    Zafirovsky is probably more annoyed about the need for another restatement than every other employee or shareholder. The restatement is a left-over from the old Nortel and not a fault of the new MikeZ-Nortel.
    The financial trouble was caused by the gang who drove the company before he came. And he needs a successful Nortel story to qualify for ‘higher’ tasks. For sure he’s pissed.
    Zafirovsky is the only one of our latest CEO’s who really undertook actions to turn the ship around. Either he will make Nortel a successful company (a completely different Nortel than it was) or it’ll be over forever. But I am optimistic that this Jack Welch clone will make the grade.

  15. The psychiatrist Says:

    To many- I agree with you 100 percent,in that it is usually the management that sets the tone and is a major factor in establishing the culture that descends on all employees,however reality has set upon Nortel and as Mike Z and his new executive ranks sift through the entire operation,there will be no room for that arrogant type of manager that may feel invincible and above the regular employees.

    The new Nortel means that there is a changing of the tide and therefore sooner rather than later all will become accountable including management,needless to say that employees who take issue with management can do so in a constructive way and result in creating a better run company,as there can be no positives from employees who allow their emotions to determine their work ethics.

    Lead by example is what comes to mind,even if you don’t hold a managerial position you can still make an impact especially as Nortel continues to transform itself towards the “BIG” goal.

    A perfect example of how the individual can make a difference is if you compare the Japanese auto industry and how hugely successful they have become to stea lmarket share from the big three,this phenomena has been linked to the culture that exists between the employees and the car makers.

    Mike Z is on the right track when his goal is to achieve six sigma as full credit should be given for realizing Nortel’s current ailment.

    If Nortel is to achieve greatness it will only come when pride and accountability will be the order of the day,and it starts right from the very bottom all the way to the top.

    Harbouring vindictiveness towards Mr.Hackney because he is in an executive position will not help Nortel reach its road to greatness, remember that he is a human being fiirst before anything else and that entails making mistakes and poor judgement on occassion.

  16. Not_A_Co-Worker Says:

    JJH and the psychiatrist = same person? No I don’t think so but is clear who is paying the psychiatrist!

  17. Apple Says:

    While the restatement is relatively minor, it’s certainly not a positive sign for a company that appeared to be gaining its footing again and more confidence from investors.
    There is nothing minor about Nortel’s restatements!
    To remind you 2004, bi-weekly statements increased the size and scope as time was passing by.
    Who would expect $3.5 bill revenues removed?
    There was nothing minor in last year restatement too.
    Nortel played it low from the beginning. Just few hundred millions and no wrong doing, said Mike Z.
    When he was asked how did he know there was no wrongdoing, he apologized few days later and stated that nobody checked if there was no foul play.
    Nobody was surprised by new delays and new restatements at Yahoo_NT message board as we deducted that Nortel will not be able to report on time and will restate again
    So 2005 will look even worse and Q2 2005 Triple Profits are buried deep in losses now. When we will see questions about reporting false Q2 Triple Profits? It’s an easy job just to imagine investors losing money playing put options for example and losing all just because Nortel reported false numbers to boost the stock price up to $3.50 or so…
    When will someone ask Nortel about $5 bill revenues removed from the books so far? Where is that revenue?
    CFO quitting and auditors replaced at the same time is not a minor thing either.
    Nortel has not finalized first lawsuits yet and the new are waiting in line for misleading in 2005 and 2006!
    SEC should put a stop to Nortel’s misery long time ago!
    Clean the books if you can and come back to the open market after that.
    How it is possible that Nortel stated once again that 2007 numbers can be late and restated too as the accounting system is not working properly yet!
    What a joke!

  18. many Says:

    “………there will be no room for that arrogant type of manager that may feel invincible and above the regular employees.”

    “……….Lead by example is what comes to mind,even if you don’t hold a managerial position you can still make an impact especially as Nortel continues to transform itself towards the “BIG” goal.”

    Are you referring to Joel Hackney with these statements? If so, you certainly have a point, but only if the leadership “walks the walk”. Right now things don’t look too good.

    Six-Sigma is a gimmick and a buzz word left over from the 90’s. When I was with Nortel I traveled to India for them to interview some of the “six-sigma” software houses. Believe me when I tell you it is not the panacea you have been lead to believe. Its like TQM and Quality Circles were during the 1980’s when Japan was going to eat our lunch.

    You need to understand that unless Mr. “Z” can make profitable sales deals(unlike the India and Iraq deals) they will not survive. Unless he can cut SG&A costs (which so far he has not been able to do) they will not survive. I would be willing to bet that the same ratio of senior management to employee as was true in the 1990’s exists today. I would believe that the same SG&A costs per employee exist today. Bottom line; the margins just ain’t there.

    If Mike “Z” wants to lead by example, working for US$1.00 like his competitor Mr. Chambers instead of looting the sinking ship would be a good gesture. Publicly firing the bully Joel Hackney would be a good gesture. Cutting the ratio of managers to workers and increasing the span of contol for the remaining would be a good gesture. Ultimately they are going to have to leave one or two lines of buisness and stop being a mile wide and an inch deep.

  19. Not Observer Says:

    It should be known that a change in auditors CAN NOT happen until shareholders approve the change at an Annual General Meeting. This hasn’t happened. KPMG in not Nortel’s current auditor at this time. The change in auditor proposal should pass, but we need to understand the facts.

    When we see the 2006 Annual Report pay attention to Deferred Revenues. This is a holding bucket for future revenues that have yet to pass GAAP requirements for revenue recognition. This is where revenue adjustments land.

  20. the application delivery network » A Slow Week in Application Delivery Says:

    […] Things seemed to slow to a crawl in the adn market after Cisco’s announcement, with the most bits being spent on discussing Nortel’s current woes of a crazed executive and its announcement that it will, once again, restate its earnings. […]

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