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Nortel sees weak sales
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February 12, 2002: 10:53 a.m. ET
Telecom gear maker sees lower revenue, and stock slumps.
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NEW YORK (CNN/Money) - Nortel Networks said Tuesday that business was surprisingly weak in the first quarter, and its CEO tried to distance the telecommunications equipment maker from Enron Corp. after Nortel's CFO resigned abruptly on Monday.
Frank Dunn, chief executive of North America's second-biggest telecom equipment company, said the abrupt resignation of Nortel's CFO was due to improper investments in the company's 401(k) retirement program and nothing more.
"This matter is unfortunate but the actions we have taken are in the best interests of Nortel Networks," Dunn said. At a conference with analysts Tuesday morning, he tried to distance Nortel from Enron by stressing that company officials have had no discussions with regulators about the company's business practices.
"It all focused on Terry and his personal trading," Dunn said.
Despite Dunn's efforts, Nortel's (NT: down $0.52 to $6.32, Research, Estimates) U.S. shares sank about 7 percent in morning trading, and were well off their 52-week high of $32.60.
The resignation of CFO Terry Hungle came as investors key in on how corporate executives profit from trading stock held in their own companies. Top Enron officials made millions selling company stock before the Houston-based energy marketer collapsed last year, while many other employees saw their retirement savings evaporate.
Hungle resigned Monday after questions arose about personal investments he made in the company's 401(k) retirement plan just ahead of corporate announcements that caused significant swings in the Canadian company's stock price.
In a statement sent to Associated Press, Hungle admitted errors in making the transfers but said he wasn't trying to profit from his position with the company.
The Ontario-based maker of telecommunications gear forecast a return to profitability by the end of the year. Nortel said it expects ongoing steady improvement to its bottom line compared with its fourth-quarter 2001 performance. However, revenue is expected to decline 10 percent in the first quarter from the fourth because customers have pared spending.
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Nortel (NT: Research, Estimates) said Monday that recently appointed CFO Hungle transferred investments in the company's 401(k) retirement plan outside the trading window imposed on certain employees.
Nortel has struggled to cope with sluggish demand and a sharp drop in its stock price by cutting thousands of jobs.
Nortel last month reported a fourth-quarter loss in line with Wall Street expectations, noting then that first-quarter revenue likely would fall 10 percent below fourth-quarter results of $3.46 billion. 
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