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Nortel delays reporting financials

The company says it will miss its June 30 deadline to report its 2003 and first-quarter financials.

Nortel Networks said Wednesday that it will not finish restating its 2003 and first-quarter results this quarter, which ends June 30.

The company, whose accounting is under investigation by U.S. and Canadian regulators, said a committee appointed by its board of directors is still at work on internal audit and restatement activity. Nortel says it doesn't have an end date for the review of all the documents necessary in providing an accurate picture of the company's accounting over the last few years. The company is required by the Ontario Securities Commission to provide updates every two weeks.

"We are making progress toward completing the restatement of our financials," Bill Owens, CEO of Nortel, said in a statement. "But this is a complex process, and there is significant work yet to be done."

Despite the accounting issues, Owens tried to put the company in a positive light, commenting on growing market opportunities for new products, such as its multiservice edge router.

"We are encouraged to be seeing good business momentum and support from our customers with growing demand for our next-generation networking solutions," he said in the statement.

Nortel's accounting came under scrutiny by Canadian and U.S. officials in March, when the company restated earnings for the second time since November. In April, the company fired former CEO Frank Dunn and two other executives as part of the fallout of the accounting scandal. It is also now the focus of a criminal investigation in Texas. In May, the Ontario Securities Commission barred 162 Nortel managers and directors from trading company shares for 15 days.

In its last restatement in March, the company said it was off by half in its statement of 2003 net income of $732 million.

Analysts were expecting the restated results to be delayed again, but they admit that the sooner the situation is cleared up, the better it will be for the company.

"Until we get new financials, we expect Nortel to remain at the mercy of negative news flow, stemming from the prior management team's problems, including alleged accounting irregularities," Stephen Kamman, an analyst at CIBC World Markets, wrote in a research note published Tuesday. "Given the uncertainty about past earnings and the future outlook, we expect most investors will price Nortel on firm value/sales multiples and technical analysis until we get new financials."