Nortel May Miss Deadline

It appears that Nortel may miss its self-imposed deadline of Jan. 10 to file its 2003 10-K with the SEC. Sources say the delay is due to a disagreement with its auditors over bad debt treatment and that many auditors wanted time off during the holidays.
If Nortel does not file by Jan.10, they have some wiggle room. Last month, Nortel said it expected to commence its filing Monday. Read into that what you may but it could allow Nortel to do something without filing a 10-K. For more details see the story below.
Nortel Networks Corp. is not expected to file its restated financial results on Monday, a development that would break a promise it made to the investment community after it missed three self-imposed deadlines last year.
According to sources, there is major disagreement between Nortel and its auditing team over the recognition of bad debt.
Nortel's auditors are adamant this is a material issue that must be resolved before the company's financial statements for 2003 and the first three quarters of 2004 can be filed with the U.S. Securities and Exchange Commission.
Another problem, sources add, is that the accountants who have been working 24 hours a day, seven days a week, on Nortel's results told the company they needed time off during the holidays, or they would quit.
“I'm not surprised [by a possible delay] only because of the company's track record in the past 13 months,” said Gabriel Lowy, head of Lowy Research in Hoboken, N.J.
Given that new SEC regulations require Nortel chief executive Bill Owens and his financial team to certify its reports, Mr. Lowy does not think “they're going to want to put their names on anything they don't feel is certifiable.”
If Nortel is forced to delay its filing, it would be yet another setback to the company's credibility, which has nearly evaporated as its financial troubles have become more complex. The company's investigation into its books goes back to 2000. This has led to the firing of CEO Frank Dunn “for cause” last April, as well as the restatement of US$3.1-billion of improperly booked revenue.
Duncan Stewart, a partner with Tera Capital, said it is difficult to tell how investors will react to another delay by Nortel.
“If the company does not come out, does the stock even go down?” he asked. “We are so used to them missing deadlines, quite frankly what does it mean if they miss another. If they say it's not the 10th but the 24th, what do you do? If you own shares, would you sell all of them if they ask for another two weeks?”
Any pressure for Nortel to meet the Jan. 10 deadline disappeared earlier this week when the New York Stock Exchange granted the Brampton, Ont.-based company an extension until March 31 to file its 2003 annual report, or 10-K, with the SEC. The world's largest stock exchange had threatened to delist Nortel's shares unless it filed its results. “The hanging knife was moved aside,” said Bob McWhirter, president with Selective Asset Management.
Nortel spokeswoman Tina Warren said the company is “driving toward Jan. 10.” She would not confirm whether Nortel will file a 10-K with the SEC on or before next Monday.
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