A few years ago, industry linked the stock woes of some of the major vendors to a general downdraft of the economy. Now that some of the companies are recording profits and racking up robust contracts, the stocks have yet to pick up steam.
Lucent Technologies Inc. and Nortel Networks Ltd. witnessed stock worries when their shares fell below $1 two years ago, raising the specter of delisting from the New York Stock Exchange. But Lucent and Nortel, which are leveraging their technology strengths and racking up contracts, are watching their stock prices tumble amid charges of accounting irregularities that have little to do with their product charms and technology offerings.
Nortel Networks shares have dropped to a nine-month low as the Canadian company rides a storm of regulatory investigations over financial irregularities. The Ontario Securities Commission slammed an order on about 160 current and former executives and board members of the company. The decision indicated that the investigation into the vendor’s finances is pervasive.
The vendor’s stock price plummeted to $3.27 on the news from Canada’s top securities regulator May 17. It fell 8.4 percent or 30 cents. It rebounded to $3.36 by May 21.
Nortel’s troubles have mounted since last September when it announced it overstated its losses by more than $900 million. The company last month fired its chief executive, Frank Dunn, as well as its chief financial officer and controller. The Securities and Exchange Commission has expanded its investigation to a potential criminal case by seeking more material from the company. The slew of class-action lawsuits against the company swelled last week, with two additional lawsuits from law firms representing the OPSEU Pension Fund and a Dutch pension fund.
Lucent said it has settled with the SEC over investigations of about $1 billion in improperly recognized revenue. The SEC last week filed a complaint and a final judgement in federal district court in Newark, N.J., confirming a previously announced settlement, according to Lucent. The SEC also fined the U.S. wireless vendor $25 million for not cooperating with its investigations.
It will be the biggest fine ever levied on a company for such corporate misdeeds. Lucent said it will pay the penalty but will not be required to make any financial restatements. Lucent’s stock price hovered around $3 on the SEC news, but rebounded to $3.21 at the end of the week. Three months ago, Lucent stock stood above $4.
“Since bringing this matter to the SEC’s attention, we have addressed these issues with increased controls and disclosures in our organization,” said Patricia Russo, chairman and chief executive officer of Lucent. “We are closing this chapter in our history, putting it behind us and focusing on moving our business forward.”
The SEC is charging at least nine current and former employees with fraud. Some of those named include Nina Aversano, former head of North American sales; William Plunkett, a former senior vice president of sales; Jay Carter, who worked in the global sales section; Leslie Dorn, vice president of channel sales; and Vanessa Petrini, director of business development in mobile high-speed data.
The stock profiles of these companies, while representing more than a 100-percent jump from when they teetered near junk status, do not signal a great leap in real terms. Both companies, as well as L.M. Ericsson, consolidated their stocks to go over their junk status and escape elimination from the NYSE.
