One Less Reason to Worry About Nortel

Article Excerpt

NORTEL NETWORKS CORP. $2.96 (Toronto symbol NT; Aggressive Growth Portfolio, Manufacturing & Industry sector; SI Rating: Speculative) has completed a review of its accounting policies, and restated its results for the past three years. Most of the problems stemmed from the timing of revenue from some major contracts. The company’s former management improperly recognized some revenue to meet certain profit targets. Nortel lost $0.59 a share (total $2.6 billion) in 2005, compared with a loss of $0.05 a share ($207 million) a year earlier (all amounts except share price in U.S. dollars). However, the 2005 loss included $2.5 billion to settle class-action lawsuits, and $217 million in other special charges. Revenue rose 10.5%, to $10.5 billion from $9.5 billion. While the restatement helps lift some of the uncertainty over Nortel, it still faces some major costs in 2006. It will contribute $335 million to its employee pension plan this year. Lawsuit settlements will cost it a further $575 million, and it plans…

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