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Nortel dives on Dunn Dismissal

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Nortel plunged nearly 30 percent on the news of executive upheavals and news of possible financial irregularities. The news of dismissal of Frank Dunn, CEO and former CFO along with a handful of other financial types has made the stock markets very nervous about the future of the company. I had a chance to chat with Blake Kirby, a smart guy who works for telecom consultants, Adventis.

bq. My view is that this is a speed bump. It does not affect anything in product terms except for company perception in the short term. They have done well in new opportunities and is positioned well for growth in areas like voip and cellular. Buyers of gear don’t look at the share price…. large telecoms don’t look at the cisco. because the company has good products. I would not mention Enron and WorldCom.

I am not sure – what with all those millions paid out as employee bonuses to the folks who have been booted.

LightReading, in an excellent piece questions the “profitability bonuses” that were awarded to senior executives including Dunn. It is an issue which makes me wonder about how widespread the conspiracy really was.

bq. For senior executives, the bonus payout came in three chunks and was quite lucrative. Each bonus was based on an undisclosed multiple of an executive’s base salary. Execs got 20 percent of the aggregate potential amount after one profitable quarter, 40 percent after two straight profitable quarters, and 40 percent after four straight profitable quarters, the SEC filings state. It’s noteworthy how “profitability” is defined in Nortel’s bonus plan description: The plan counts “positive pro forma earnings from continuing operations” as a profit, so it doesn’t acknowledge GAAP earnings.