The financial woes of Nortel Networks Ltd. plunged the company’s stock price 27 percent as the firm announced it has fired its chief executive officer, chief financial officer and controller.
The company is under investigations from the U.S. Securities and Exchange Commission and the Ontario Securities Commission.
William Owens replaces CEO Frank Dunn, while William Kerr and MaryAnne Pahapill replace Douglas Beatty and Michael Gollogly as CFO and controller, respectively.
“The board of directors believes that the actions announced today are about accountability for our financial reporting and are in the best interests of the company and all of its stakeholders, including our investors, customers and employees,” said Lynton Wilson, chairman of the board, Nortel Networks. “These actions are an important step in the process of restoring confidence in the company’s leadership and financial reporting.”
The company also confirmed its intention to review its financial reports, which sparked the top management overhaul. Nortel has set up an independent review of the circumstances that led to restatements of its financial results for 2000, 2001 and 2002 and the first and second quarters of 2003. The company said it understated its profits by more than $900 million, and the review is still ongoing.
The company also put off the unveiling of its first-quarter results for this year, owing to the announced changes. Nortel, however, revealed that its cash balance as of March 31 was approximately $3.6 billion, down from approximately $4 billion as of the end of 2003.
“At this time, the company cannot estimate the impact of any adjustments on its results of operations or financial position,” said the company.
In spite of its financial problems, Nortel has been enjoying great traction in its wireless business, leveraging its expertise in Internet Protocol and strengths in third-generation technologies, as well the competing protocols of GSM and CDMA.
Owens has been a director of the company since February 2002. Prior to that, he was chairman and CEO of Teledesic LLC, a satellite communications company. He also was president, chief operating officer and vice chairman of Science Applications International Corp.
A former military officer, he was commander of the U.S. Sixth Fleet during Operation Desert Storm. He was also vice chairman of the U.S. Joint Chiefs of Staff and the second-ranking military officer in the United States.
