RealTime IT News

Sparks Fly at Nortel Shareholders Meeting

Nortel Networks board members faced scathing criticism from shareholders today for failing to detect the accounting irregularities that sent the telecom equipment maker into a tailspin.

"So the board was not aware of anything? What [kind of] organization is this?" a shareholder asked at today's annual meeting. "We were in total darkness when this company's shares were falling from hundreds of dollars to one or two dollars. How come this board allowed this to happen?"

Nortel Chairman L.R. Wilson said the accounting problems, which closely followed the telecom industry meltdown, were "the last thing we needed or expected."

Wilson said they were not flagged by internal auditors, outside accountants or employees at any level. "I would suggest to you that no board could have found these problems," he said.

Wilson, who will retire after today's meeting, stopped short of an apology, however. "We very much regret what has happened and we've been committed to address problems head-on and solving them so we can move forward with leadership and integrity," he said.

The fallout of the accounting scandal included the firing of former CEO Frank Dunn, CFO Douglas Beatty and several other senior executives.

It also cost the Canadian company approximately $200 million to restate earnings statements. What's more, the company is still in the early stages of defending itself from class-action shareholder lawsuits.

Wilson and CEO Bill Owens also took heat for the recent resignations of President and COO Gary Daichendt and CTO Gary Kunis. The executives were on the job for only three months before resigning because their management styles clashed with Owens.

"Did the question of their management style never come up?" a shareholder asked pointedly.

Owens, who has been on the job for a little more than a year, did not elaborate on the friction, but said it was in the best interest of the company.

During a presentation, Owens outlined steps the company has taken to prevent any future ethical problems. He also tried to convince attendees that the company is back on track and is focusing on increasing its revenues and cash reserves and cutting costs.

He cited several potential growth areas: the acquisition of PEC Solutions to boost its presence in the federal government market; a joint venture with LG Electronics; and efforts to expand in markets such as China, India and South Korea. Also promising are security and voice-over-cable, he said.

"I think of you shareholders every day of my life," Owens said. "This is a consolidating market that is undergoing considerable change. We are in this not for short-term gain but long-term value, and we are playing to win."