Nortel shares fell three percent last Friday on news that the company will restate previously reported results and delay the filing of its year-end financial reports with U.S. and Canadian authorities.
The company said it will restate financial results for 2003, 2004 and the first three quarters of 2005. It will also make adjustments to periods prior to 2003, primarily due to revenue it now says was incorrectly recognised in prior periods that should have been deferred to future periods.
“This revenue is real — it was recognised in the wrong periods. The restatements do not affect the company’s cash position,” said a statement from CEO and President Mike Zafirovski.
The company said the restatement to result in 2003 seeing a drop in revenue of $157 million and a decline in income of $91 million, while 2004 will see revenue reduced by $77 million, while income should decline by $93 million. Its previously reported results for the first three quarters of 2005 will see revenue decline by $162 million and net earnings fall by $95 million.
“Although the need to restate certain financial statements is unfortunate, it’s the right thing to do,” said Zafirovski’s statement. “The extensive contract review we undertook in 2005 underscores our commitment to ensure a solid foundation for this company going forward.”