Monday, April 05, 2004

TORONTO (CP) - Nortel Networks shares dropped sharply Monday after the company announced that the U.S. Securities and Exchange Commission has launched a formal investigation into financial restatements by the telecom equipment maker.

Nortel Networks stock (TSX:NT) opened at $7.68 on the Toronto Stock Exchange, down seven per cent from Friday's close of $8.27. But within minutes the shares had recouped some of their losses, trading down four per cent at $7.97.

In a brief statement before markets opened, Nortel said it has been co-operating with the SEC since October when the company announced a sweeping restatement of its financial statements for the years 2000-2002 and parts of 2003.

A second restatement announced in March, which hasn't been completed, has had a bigger impact - spawning a number of U.S. lawsuits from investors and the suspension, with pay, of Nortel's chief financial officer.

The Brampton, Ont.-based company has also postponed its annual shareholders meeting and its final annual report until the second review of its bookkeeping is completed.

Nortel had previously announced preliminary results for 2003, but on March 10 it said the filing of an audited report for the year would be postponed, putting Canada's biggest technology company in technical default of debt agreements.

That announcement caused little concern among analysts but within days Nortel's stock plunged after Nortel announced that CFO Douglas Beatty and controller Michael Gollogly had been put on paid leave pending completion of an independent review by Nortel's audit committee." That review is examining what caused the company's restatement of 3½ years of financial results late last year.

Nortel also said at the time it is "co-operating with inquiries" from the SEC and the Ontario Securities Commission.

Nortel shares started the year at $5.49 before rocketing as high as $11.94 after preliminary results for 2003 showed earnings of $732 million US - its first annual profit since 1997 and up from a restated loss of $3.27 billion US in 2002.

National Post

-- Anonymous, April 05, 2004

Answers

Nortel Networks Says SEC Opens Formal Investigation

Nortel's restatement last year, which covered results from 2000 through the first half of 2003, reduced accumulated losses by $505 million to $33.2 billion and pared sales by $121 million.

Bloomberg

-- Anonymous, April 05, 2004