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Technology Stocks : Nortel Networks (NT) -- Ignore unavailable to you. Want to Upgrade?

To: Bosco who wrote (10014)	2/21/2001 9:07:58 AM
From: Stocker	Read Replies (1) \| Respond to of 14638

Employee's cash out precedes Nortel fall Technology officer resigns quietly, collects US$18.4M Michael Lewis and Theresa Tedesco Financial Post The chief technology officer of Nortel Networks Corp. quietly resigned from the telco giant and exercised US$18.4-million in stock options just three days before the company issued a profit warning that shaved one-third off its stock price. Bill Hawe's resignation on Feb. 12 was only disclosed internally by the company a week later and public investors learned of his departure "to seek other opportunities" only yesterday. Also yesterday, JDS Uniphase Corp. appeared to soften its combative stance against Nortel, saying it has ruled out taking legal action against its largest customer. According to Nortel, Mr. Hawe exercised about 602,000 options at the time of his resignation and sold the shares, a transaction that would be worth US$18.4-million based on Nortel's US$30.57 closing price on the date of his departure. Yesterday, the shares closed at US$18.87 in New York. Nortel spokesman David Chamberlin would not comment on whether the resignation was related to the 10,000 job layoffs announced by Nortel last week. Mr. Hawe, who joined Nortel in 1998 and was not available for comment, will be replaced by Jules Meunier, who has been president of Nortel's core network division. JDS said it is not likely to pursue a lawsuit against Nortel as a result of unexpectedly losing $1-billion -- a day after officials expressed "shock" and suggested the company was considering a lawsuit. "It's unlikely that we'll take legal action against our largest customer," said Anthony Muller, chief financial officer of JDS. "We do not want to be involved in litigation with a customer. It is never easy to litigate with a major customer." Mr. Muller confirmed that JDS officials have had "several conversations with Nortel" in recent days, because the firm is determined to "maintain a dialogue with Nortel, one of our most important customers." Nortel purchases about 10% of JDS's annual sales of fibre-optic components for its transmission systems. Earlier, Mr. Muller had declared Nortel's earnings warning was a "considerable surprise," and that subsequent reduction in the value of the deal to JDS was "a substantial amount of money." He added that JDS has "a duty to its shareholders. We're at the stage now where we're studying the entire situation very, very carefully." At the time, Mr. Muller said the company was reviewing a number of options, including legal action. Since last week's profit warning, JDS officials have been meeting with their Toronto-based lawyers, however, Mr. Muller refused to comment on the nature of those discussions except to say "good lawyers give good advice." A major shareholder of JDS said the fibre-optics company is likely "negotiating something with Nortel under the threat of suing them." The institutional shareholder, who asked not to be named, said $1-billion "was a lot of money to walk away from," and negotiating a resolution with Nortel would take weeks. "This is a business judgment problem," said the shareholder. "It's hard to second-guess management on how good a legal case they would have and of course, what the implications are of pissing off Nortel." Tina Warren, a spokeswoman for Nortel, would not comment on any discussions between the two companies, saying "that would be speculative and rumour. We have nothing to add." Meanwhile, a lawsuit filed in Newark, N.J., draws a direct link between the JDS deal and Nortel's failure to inform investors of its mounting financial problems. The court documents alleged Nortel and its senior executives "had additional motive to conceal Nortel's precarious financial condition" because it was planning to finance the acquisition of JDS's Swiss subsidiary using 65.7-million of its common shares. As a result, the documents alleged, "the value of the shares became crucial." A fourth U.S. shareholder classaction against Nortel is expected to be filed today, and a lawyer involved said if the information about Mr. Hawe's trading activity is accurate, his firm will amend its complaint to include the former executive. The controversial deal closed on Feb. 13, two days before Nortel stunned the financial world by slashing its earnings forecast by two-thirds and its revenue outlook in half. A senior securities lawyer in Toronto said it was "extraordinary" that JDS did not know about Nortel's imminent profit warning. "It's not brain surgery if you are taking billions in stock you should get assurances that there is no materially undisclosed information," said the lawyer who asked not to be named. Mr. Muller refused to comment on the substance of the due diligence except to say JDS officials met face to face with Nortel executives and secured "a variety of contractural obligations that are customary for transactions like this, that's all I can say." The deal, which closed when Nortel's shares were worth $45.04 each, does not provide a so-called collar to protect JDS and its shareholders in the event that Nortel's stock price fell.