Pledging to make Nortel “a beacon of best practices for financial and corporate governance activities,” new CEO Mike Zafirovski faced financial analysts this morning with some all-too-familiar news: Nortel is once again restating its earnings, to reflect improper reporting of revenue, and will miss the deadline for filing 2005 results.

This restatement comes as the result of an extensive internal review of all major contracts, which showed some revenues had been recording in the wrong period said CFO Peter Curry.

“We determined there were certain misapplications of accounting theory relative to when certain revenues can be realized,” he said. “This conforms Nortel with a more conservative approach. There is no impact on cash position, and we will complete filing of 10K for 2005 by April. We are moving quickly to complete the [restatement] work.”

The company released preliminary, unaudited results for 2005 which showed Nortel lost $2.21 billion, or 51 cents a share, in the fourth quarter of 2005 because of a litigation expense of $2.47 billion, or 57 cents a share. Revenue for the quarter was $2.95 billion, up from $2.59 billion a year ago.

The restatement will remove $162 million in revenue and $95 million in net income from the first nine months of 2005, and will reduce revenue from 2003-2004 by $234 million and earnings for that period by $184 million.

The restatements should not have a material impact on 2006 revenue or earnings, Zafirovski said.

Nortel will request a temporary waiver from its lenders, since the delay in reporting 2005 earnings will take the company out of compliance with its lending agreements.

Zafirovski insisted things are looking up at Nortel, telling analysts that, based on his intensive study of the company he joined in November, “Most CEOs would kill to have this on their balance sheet,” he said, also praising the strength of the work force.

He conceded that the company has operational liabilities that won’ be easy to fix and called Nortel’s quality “only average, not yet world class,” but said efforts are already under way to change that.

Both men characterized 2005 as a good year for Nortel, with Zafirovski calling it Nortel’s best year since 1998.

“We returned to normalcy in 2005,” said Curry. “It’s unfortunate that this statement takes us off that track. I’m not personally satisfied that it takes it as long as it takes us to get our financial results out there. But we will get back into a zone you would expect form a top flight financial organization.”