updated 8/19/2004 8:53:57 AM ET 2004-08-19T12:53:57

Nortel Networks said Thursday it will slash its work force by 3,500, or 10 percent, as the telecom-equipment maker struggles to recover from an accounting scandal that toppled three top executives and led to a criminal investigation and lawsuits.

The Canadian company also said it has fired seven finance employees "for cause."

Nortel said it will demand the fired employees pay back money from the company's 2003 bonus plans, "and will take further additional action with respect to these individuals, if appropriate."

The firm also said Thursday that "estimated unaudited" earnings per share in the first half of 2004 were break-even to 2 cents a share, with zero to 1 cent a share earned in each quarter.

Estimated revenues for the first six months of the year were approximately $5.1 billion, with $2.5 billion in the first quarter and $2.6 billion in the second quarter.

Former CEO Frank Dunn was one of the three top officers fired in April as the company announced it would have to restate its financial reports for past years.

Shareholders have since filed several lawsuits against the company, and on Monday Nortel announced a Royal Canadian Mounted Police criminal investigation into its accounting.

When the former high-tech darling fired three top executives in April, citing faulty accounting, it warned that its stated 2003 profit of $732 million would be cut in half. The Brampton, Ont.-based firm reports in U.S. dollars.

"With the restatement moving toward completion, we are focusing our full attention on driving the business forward with a focus on costs, cash and revenues as overall strategic imperatives," new CEO Bill Owens said Thursday.

Owens said he was "saddened that these actions will necessitate a decrease in our work force."

"I recognize the impact these measures will have on these fine people who have served Nortel Networks well," he said.

Copyright 2004 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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