Nortel restatement seen next week, outlook key
yahoo.reuters.com
Nortel restatement seen next week, outlook key
Fri Oct 22, 2004 04:31 PM ET Nortel restatement seen next week, outlook key
Fri Oct 22, 2004 04:31 PM ET
(In U.S. dollars unless noted)
By Susan Taylor
OTTAWA, Oct 22 (Reuters) - Analysts will wade through the flood of revisions to financial data that Nortel Networks Corp. (NT.TO: Quote, Profile, Research) is expected to unleash next week looking not so much for insights into its past, but for clues to its future.
"Believe it or not, we're not looking for a huge amount of change in expectations," said Charter Equity Research analyst Edward Snyder. "The next piece of the puzzle, and the one that is of great interest to the financial community, is their outlook."
Nortel, one of the world's largest telecoms equipment makers, is expected to release restated results for the years 2001 to 2003 next week as well as detailed financials for the first half of 2004.
The Brampton, Ontario-based company has spent months working to untangle accounting irregularities that have sparked criminal and regulatory investigations and has said it will deliver the fruits of its efforts by month's end.
Financial filings could come as soon as Tuesday, but will most likely land Wednesday, said Smith Barney Citigroup analyst Alex Henderson. He expects a conference call on Thursday, the day of Nortel's regularly scheduled status update.
Nortel expects the restatement to almost eliminate 2003 earnings from continuing operations, and halve the net earnings of $732 million, including discontinued operations, that it originally reported.
It has estimated it earned between nil and 1 cent a share in each of the first two quarters of 2004, with second quarter results including a 2 cent contract settlement gain. Revenue was $2.5 billion in the first quarter and $2.6 billion in the second.
"They've given enough information that ... there's more or less a belief that in 2003 they didn't make any money and that that probably persisted into the first half of 2004," said Sanford Bernstein analyst Paul Sagawa.
"If they give any guidance for future margins, future revenue growth, future expense levels, etc., that's probably the single most important thing."
But historical financials will be scrutinized so that analysts can put the results into perspective, by tracking advances or gains in sales and profits.
There may also be clues to what liability Nortel faces as a result of its accounting fiasco and related lawsuits.
Shareholders have alleged Nortel officers cooked the books so that the company could turn a profit in 2003, allowing them to benefit from a return-to-profit plan that paid out millions of dollars. The allegations have not been proved in court.
Nortel has fired 10 executives, including former chief executive Frank Dunn, and is demanding repayment of $10 million in bonuses paid to them.
Analysts will also scan the material for information on the performance of the company's wireless division, a key contributor to sales.
"The so-called growth story at Nortel is wireless, so there will be extra scrutiny on all things related to wireless," said one analyst, who asked not to be named. "Did they futz around with what the wireless revenue was? Or is it different from what they said?"
The "quality" of the income statement will also be tested.
"The No. 1 thing I want to see is the full balance sheet," said Lehman Brothers analyst Steve Levy, citing such items as inventory, accounts receivable, and accounts payable.
"They give you an idea of how hard the company is working to make the numbers. If receivables are growing...especially if they're growing much faster than revenue, that gives you an idea...that they're basically stretching to make the numbers."
(In U.S. dollars unless noted)
By Susan Taylor
OTTAWA, Oct 22 (Reuters) - Analysts will wade through the flood of revisions to financial data that Nortel Networks Corp. (NT.TO: Quote, Profile, Research) is expected to unleash next week looking not so much for insights into its past, but for clues to its future.
"Believe it or not, we're not looking for a huge amount of change in expectations," said Charter Equity Research analyst Edward Snyder. "The next piece of the puzzle, and the one that is of great interest to the financial community, is their outlook."
Nortel, one of the world's largest telecoms equipment makers, is expected to release restated results for the years 2001 to 2003 next week as well as detailed financials for the first half of 2004.
The Brampton, Ontario-based company has spent months working to untangle accounting irregularities that have sparked criminal and regulatory investigations and has said it will deliver the fruits of its efforts by month's end.
Financial filings could come as soon as Tuesday, but will most likely land Wednesday, said Smith Barney Citigroup analyst Alex Henderson. He expects a conference call on Thursday, the day of Nortel's regularly scheduled status update.
Nortel expects the restatement to almost eliminate 2003 earnings from continuing operations, and halve the net earnings of $732 million, including discontinued operations, that it originally reported.
It has estimated it earned between nil and 1 cent a share in each of the first two quarters of 2004, with second quarter results including a 2 cent contract settlement gain. Revenue was $2.5 billion in the first quarter and $2.6 billion in the second.
"They've given enough information that ... there's more or less a belief that in 2003 they didn't make any money and that that probably persisted into the first half of 2004," said Sanford Bernstein analyst Paul Sagawa.
"If they give any guidance for future margins, future revenue growth, future expense levels, etc., that's probably the single most important thing."
But historical financials will be scrutinized so that analysts can put the results into perspective, by tracking advances or gains in sales and profits.
There may also be clues to what liability Nortel faces as a result of its accounting fiasco and related lawsuits.
Shareholders have alleged Nortel officers cooked the books so that the company could turn a profit in 2003, allowing them to benefit from a return-to-profit plan that paid out millions of dollars. The allegations have not been proved in court.
Nortel has fired 10 executives, including former chief executive Frank Dunn, and is demanding repayment of $10 million in bonuses paid to them.
Analysts will also scan the material for information on the performance of the company's wireless division, a key contributor to sales.
"The so-called growth story at Nortel is wireless, so there will be extra scrutiny on all things related to wireless," said one analyst, who asked not to be named. "Did they futz around with what the wireless revenue was? Or is it different from what they said?"
The "quality" of the income statement will also be tested.
"The No. 1 thing I want to see is the full balance sheet," said Lehman Brothers analyst Steve Levy, citing such items as inventory, accounts receivable, and accounts payable.
"They give you an idea of how hard the company is working to make the numbers. If receivables are growing...especially if they're growing much faster than revenue, that gives you an idea...that they're basically stretching to make the numbers." |
