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Nortel figures hurt by EMEA accounting changes

Alex Scroxton

Nortel's net losses have widened to $1.5bn during its second fiscal quarter after incurring $1.4bn in non-cash charges relating to a change in accounting for its EMEA subsidiaries.

Nortel has accounted for its EMEA business by the equity method of accounting since it fell into Chapter 11 in January 2009, but as of 31 May this year the vendor determined that it "no longer had significant influence over the operating and financial policies of the EMEA subsidiaries, primarily due to the significance of the completed business divestitures".

Accordingly, it has now accounted for the EMEA business as an investment using the cost method from 1 June, the fair value of which was nil.

This means Nortel booked a Q2 charge of $760m due to the recognition in income of deferred pension charges, and $650m to reflect its guarantees of the UK pension pot.

Although a shadow of its former self, the vendor continues to report quarterly figures from its remaining operations, and during the three months to the end of June made total sales of $145m, with year-on-year declines in all segments.

During the quarter it booked sales from its Wireless Networks, Carrier VoIP and Application Solutions (CVAS), Metro Ethernet Networks (MEN), mostly from residual contracts not included in the sales to Ciena and GENBAND.

Nortel has now generated $3.2bn in net proceeds from the sale of its businesses, and claims to have preserved 13,000 jobs worldwide.

 


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