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

To: Dave who wrote (13103)	7/18/2002 11:42:05 AM
From: StormRider	Read Replies (1) \| Respond to of 14638

Analysts Applaud Nortel's Choice for CFO By Susan Taylor OTTAWA (Reuters) - Analysts applauded Nortel Networks Corp. (NYSE:NT - News; Toronto:NT.TO - News) on Wednesday as the beleaguered telecoms equipment supplier named a corporate insider to take on its top finance job as it struggles with falling demand, big debts and fading investor confidence. The announcement that Douglas Beatty, a 47-year-old controller at the company would take over as chief financial officer, effective immediately, came only hours before Nortel faced another hurdle: a class action lawsuit that alleges the company used "improper accounting practices" to overstate its revenues. While analysts warned that Beatty faces formidable problems, many said his experience within Nortel should help, not hinder, the firm's recovery plans. "Nortel is not the world-conquering company that it was a couple of years ago. These guys need to get their house in order -- you don't need a lot of disruption," said Duncan Stewart, a fund manager at Tera Capital Corp. in Toronto. "This is not the time for Nortel to be out there with some guy who can pull rabbits out of hats." Beatty takes over from chief executive Frank Dunn, who had held the jobs of both CFO and CEO since February. Dunn temporarily took on the CFO post after Terry Hungle resigned for buying and selling Nortel stock in ways that violated company policy. "This is no easy job," said Joanna Makris, an analyst at Adams, Harkness & Hill in Boston. "In this environment, the CFO needs to, from the get-go, establish a sense of credibility and a sense of honesty, an accountant's honesty, about numbers." C$6 BILLION SUIT On Wednesday, Nortel was hit by a suit, seeking C$6 billion ($3.9 billion) in damages, alleging it used practices such as extending financing to uncreditworthy customers so they could buy Nortel equipment and pulling forward revenues from 2001 through 2003 to bolster results in 2000. The suit was filed in the Ontario Superior Court of Justice by Toronto-based law firms Rochon Genova and Lerner & Associates. The plaintiffs include a doctor, farmer and teacher who invested in Nortel when the company was still a stock market darling. The allegations come at a sensitive time for equity markets, which are still reeling from multibillion U.S. accounting debacles ranging from Enron Corp. to WorldCom Inc., which have focused investor attention on corporate finances and thrust chief financial officers into the spotlight. Beatty joined Nortel in 1985, after six years in control and treasury posts with a Canadian investment company. He held a range of senior financial positions at Nortel until 1995, when he joined phone company Sprint Canada Inc. as vice-president of finance. Beatty returned to Nortel in March, 1999 as controller. "We conducted an extensive search for a new CFO," Dunn said in a statement. "It became clear that Doug is the ideal executive for the role. He has proven himself to be a critical member of our executive team, helping formulate and execute our strategy to return the company to profitability." Nortel could come under criticism for again hiring an insider for a top job, but many analysts said it made sense to appoint a CFO who knows the corporation's nuances. Nortel named former CFO Dunn to the CEO post in October 2001. "They, I'm sure, had their pick of the litter. As much as Nortel's at a buck and change, it's still a very sizable company," said Chet White, an analyst at Wells Fargo Securities in Los Angeles. "You assume you have a turnaround story on your hands." APPOINTMENT SEEN AS POSITIVE Ian Nakamoto, managing director of portfolio research at Bonham and Co. in Toronto, said the appointment of an insider is a positive: "The person they named is intimately knowledgeable about the Achilles heel of Nortel." Beatty has a low profile with Wall Street, but that will start to change when the company reports its second-quarter results on Thursday. Analysts are forecasting a pro forma loss of 9 cents per share, excluding one-time gains and charges, and sales of $2.8 billion. Nortel lost $27.3 billion in 2001 and its credit ratings have been cut to "junk" status. Its fortunes are tied to a rebound in demand for phone, wireless and Internet equipment, that analysts don't expect before late 2003 or early 2004. Nortel, which had $4.8 billion in debt at the end of the March quarter, recently raised a net $1.5 billion from an equity and convertible debt offering. Shares in the once high-flying market star closed down 17 Canadian cents at C$2.10 on Wednesday on the Toronto Stock Exchange, down some 98 percent from their June 2000 peak of C$124.50. In New York, the stock was off 10 cents at $1.35. ($1=$1.54 Canadian)