Nortel says it's not investigating improper conduct

Computerworld - Nortel Networks Corp. clarified yesterday that its plans to restate results back to 2003 are not because the company is investigating improper conduct.

"The company wishes to clarify that Nortel's internal and external auditors have not undertaken an investigation as to whether any improper conduct may be associated with the need to effect the latest restatement," the company said in a statement yesterday.

The restatement, which was announced last Friday, was the third in recent years and brought sharp negative reactions from some analysts. It was those analyst comments that the Brampton, Ontario-based company apparently sought to quell with yesterday's statement (see "Nortel to again restate results, sees steep loss").

But Nortel customers seem to be unfazed by any of it. "Nobody is upset or concerned," Steve Ford, president of the International Nortel Networks User Association (INNUA) in Chicago, said today. "We kind of take [the restatements] like water off a duck's back."

Ford, who is coordinator for electronic service at Northeastern State University in Tahlequah, Okla., heads the largest Nortel user group, with about 5,000 members.

Ford said the INNUA board was holding a meeting Friday when Nortel's management called to inform it of the restatement.

"They explained things and get credit for contacting us proactively," Ford said. "It's not that Nortel lost revenue. They just put it in the wrong quarter."

Nortel CEO Mike Zafirovski said in a statement Friday that Nortel's third restatement of financial results in recent years was "unfortunate, but the right thing to do."

Nortel described the need for the restatements of results for 2003, 2004 and part of 2005 "primarily due to revenue incorrectly recognized in prior periods that should have been deferred to future periods." The restatement will be issued in April.

Ford is not only the INNUA president, but his job is also affected by the performance of Nortel products, which he said has been good. He oversees three campus voice networks running entirely on Nortel gear and is slowly introducing voice over IP phones, with 400 installed out of 3,000.

One IT manager at another big Nortel user, The Burlington Northern and Santa Fe Railway Co. in Fort Worth, Texas, said the latest restatement should not detract from Nortel's strong points. "I have to believe this [restatement] is reflective of poor financial management, but does not have any adverse impact to or is reflective of Nortel's technical capability or product reliability," said Fred Gratke, assistant vice president of telecommunications at BNSF, in an e-mail.