Nortel: No error in forecasting method

(Telephony) Nortel Networks is refuting a news report that it made a “fundamental error” in how it assessed demand for its products in first quarter 2001, which led to an unexpected earnings warning.

Reuters based the story on comments allegedly made by CEO John Roth that indicated the company based its planning on feedback gained primarily from network engineers, instead of on input from those controlling the capital needed to make the purchases.

A Nortel spokesman attempted to set the record straight.

“Let me make it clear that Nortel never admitted any error in their forecasting method,” he said. “What John Roth specifically said, and I’ve heard him say this a couple of times, is, ‘Look, when we’re going out and dealing with our customers, we’re dealing with the network planners. We’re not dealing with the treasurers, because the treasurers don’t determine the market, or what equipment they need to handle their capacity.’”

The spokesman added, “He said, ‘If there’s any learning that’s going to come out of this, it’s that next time, and from now on, we’ll be a lot closer to the treasurers of the company as well, because the network planners don’t hold the purse strings. Their job is to forecast capacity and deal with that, and plan accordingly, and order accordingly.’”

The reason it is now important to touch base with company treasurers when it wasn’t in the past is because the economic downturn currently wreaking havoc on the telecom sector is quite different than those that preceded it, the spokesman said.

“What’s happening in the capital markets has never really happened before,” he explained. “Usually economic downturns are very different, and it’s not the capital markets that caused them.”