Nortel: Hold, Please

News brief: I am not anti-Canadian. That was my favorite of the retorts I received after my July 7 article on Nortel Networks (NYSE: NT). C'mon, I don't even know any good Canadian jokes. Are there even any good Canadian jokes? OK, here's the deal -- the first person who sends me a good Canadian joke, one that makes me laugh, I will send an autographed copy of David and Tom Gardner's new book, Money After 40. Two stipulations: Jokes about North Dakotans don't count, and no fair sending a lawyer joke where you just substitute "Canadian" for "lawyer."

And the third rule of two is: No Newfie jokes.

To recap: I noted that Nortel was in the midst of having to restate several years' worth of financial statements, and earlier this year the company had fired the chief executive who was supposed to clean the place up "for cause." The company has brought some new, hard-nosed folks in to strip out the old. But fiddling with the numbers was so ingrained at Nortel that until the company completes its restatement I just don't think that any outside investor can be sure that there isn't more bad news hiding somewhere.

In other words, guardese de las cucarachas. Where there is one problem, plenty more may be lurking in the dark. This isn't anti-Nortel. It's caution, the willingness to let a few high-risk points pass you by until you're more sure the company has no more bad news on the way. Accounting problems are sort of like cigarette smoke -- they linger and can stink the joint up for years after you quit smoking. So when a company drops clue after clue that it doesn't know what things as basic as profit margins are going to look like after it finishes its restatements, this might be a good thing to take into account.

What happened in the interim three weeks is pretty simple -- Nortel's management came out and stated that they were not achieving its stated profit margin goal of the mid-40% range. The result has been brutal, with the stock having dropped more than 23%. That's just the way it is. Nortel's management is still cleaning up, they're dealing with creditors and a lousy -- though if Verizon's (NYSE: VZ) results are indicative, slightly improving -- telecom market, they have significant cultural changes to make, and the company still has to lay off a bunch of employees. Add in the great bogeyman of a rapid rise in Chinese competition in an equipment market already lousy with oversupply, and you don't have the ingredients of a rapid turnaround.

There's plenty of time to jump back into Nortel. Let 'em tidy up first.

Bill Mann owns none of the companies mentioned in this article.