Nortel - is the rot still there ?
Nortel Networks fell from grace many years ago. It has consistently and continually had to restate its figures, though recently tings were starting to look better – until now.
Shares of the company dipped on Thursday after it announced that it would need to, once again, restate it financial results.
While some investors are disappointed that this ugly saga has not yet concluded and sentiment may suffer as a result, the disclosed errors for revenue recognition and retirement costs are in the range of US$10-million, according to Merrill Lynch analyst Vivek Arya.
He thinks this number is relatively minor and maintained a “neutral” rating on Nortel shares.“We believe that Nortel has the right restructuring plan and a capable team to implement it, but thus far we have not seen any tangible progress,” Mr. Arya said in a research note.
Nortel only got up to date with its financial filings in June 2006 after it had to pay $2.4bn in cash and shares to settle class action lawsuits that were launched against the company after a revenue-recognition scandal that led to the firing of three top officers in April 2004.
CEO Mike Zafirovski said Nortel had made great progress advancing its business transformation plan in 2006 and the announcement would not slow its progress or divert its focus.
Clearly, there is still some way to go with Nortel, a fragile confidence has seen the companies stock perform well since it’s low this year of $19. We hope that this will not send too many people rushing to sell. Or perhaps it’s time for someone with courage to come in and sell off parts of the company – there is plenty of value hidden in there somewhere.