Nortel Stock Plunges on Suspensions

Nortel Networks Corp. shares plunged Monday after the telecom equipment giant shook investor confidence by placing two top executives on paid leave as part of an accounting review.

The suspension of Chief Financial Officer Douglas Beatty and Controller Michael Gollogly came less than a week after the firm said it would likely restate its results for the second time in six months and delay filing key documents with U.S. regulators.

The moves are the result of an independent accounting review launched last year by Nortel’s board audit committee.

Initially viewed by many as a housekeeping exercise, analysts are now wondering whether the review has uncovered deeper and more worrying issues with Nortel’s accounting.

Shares of Ontario, Canada-based Nortel tumbled nearly 19% in Toronto trading, and its New York Stock Exchange-listed shares followed suit, losing $1.19 to $5.24. The stock had been as high as $8.39 in mid-February.

J.P. Morgan analyst Ehud Gelblum downgraded Nortel to “neutral” from “overweight”, citing uncertainty. “We believe today’s announcement is an indication that accounting problems could be more serious than we had thought,” he told clients.