Nortel Replaces 3 Top Executives

Nortel Networks Corp. fired its top three executives Wednesday and said accounting problems already under investigation by regulators ran deeper than expected.

The surprise announcement from North America’s largest maker of telecommunications equipment sent its shares plunging.

The Brampton, Canada, company said it expected a restatement to halve 2003 earnings but reduce losses in previous years. In January, it had reported an unaudited 2003 profit of $732 million.

Nortel said the restatement would not affect previously reported revenue or its cash balance, which was about $3.6 billion on March 31.

Nortel named a former admiral as its chief executive and said first-quarter results would be delayed. They had been due today.

Shares of the onetime stock market darling sank $1.59 to $4.05 on the New York Stock Exchange with more than 164 million shares traded.

“Nortel could bounce around like a pingpong ball in a hurricane. On the one hand, the industry demand is good and Nortel is well positioned.... On the other hand, think of all the possible headlines,” said Bernstein Research analyst Paul Sagawa. Shareholder lawsuits are certain, he added, and indictments against company executives are possible.

Ratings company Standard & Poor’s cut Nortel’s ratings deeper into junk territory.

The company said CEO Frank Dunn had been “terminated for cause” and would be replaced by William Owens, a former vice chairman of the U.S. Joint Chiefs of Staff, who has been a Nortel director since 2002.

Also fired with cause were Chief Financial Officer Douglas Beatty and Controller Michael Gollogly, both placed on paid leave in March.

Ontario-based Nortel named William Kerr as CFO and MaryAnne Pahapill as controller. They had been serving in the roles on an interim basis.