Nortel fires chief

NORTEL Networks Corp, North America’s largest maker of telephone equipment, fired chief executive Frank Dunn because of accounting mistakes and said it may have to reduce last year’s earnings 50%.

The Brampton, Ontario-based company also fired its chief financial offer and controller and said director William Owens, a 63-year-old retired admiral and former vice chairman of the US Joint Chiefs of Staff, will replace Mr Dunn. Nortel shares tumbled by as much as 29%.

Investors had credited the 50-year-old Mr Dunn, chief executive since 2001, with returning Nortel to its first profit since 1997 last year after cutting about 60,000 jobs and shutting plants.

His firing and Nortel’s second restatement in less than a year calls into question the extent of Nortel’s recovery, investors such as Gavin Graham of Guardian Group of Funds in Toronto said.

“How trustworthy are any Nortel numbers now?

“Anything they come out with now is going to have to be checked and double- checked before anybody believes anything,” said Graham, who is director of investments at Guardian Group, which manages the equivalent of $2.43 billion in assets including Nortel shares.

The firings are about accountability and are an important step in restoring shareholder confidence, Nortel chairman Red Wilson said.

Executive bonuses based on Nortel’s return to profitability last year are being reviewed, William Kerr, who replaced Douglas Beatty as chief financial officer, said.

Shares of Nortel plunged $1.59 to $4.05 at 9.35am in New York Stock Exchange Composite trading after falling to $4.

Before today, the shares had risen 33% this year.

The company is the focus of investigations by the US Securities and Exchange Commission and the Ontario Securities Commission.

Mr Dunn in November presided over a restatement of Nortel’s results from 2000 through the first half of 2003 in which total losses were reduced by $505m to $33.2bn and sales were pared by $121m.