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OTTAWA/TORONTO, Mar 11 (Reuters) Nortel Networks Corp. will once again have to restate its financial results to fix accounting mistakes, the company said on Friday as it posted a fourth-quarter loss of $2.2 billion.

Canada's Nortel, one of the world's largest telecommunications equipment suppliers, said the loss will result from paying $2.5 billion to settle two class-action lawsuits that stemmed from a previous bout of accounting troubles that battered the company's stock and reputation.

In preliminary figures released on Friday, Nortel said its fourth-quarter net loss would be $2.2 billion on revenue of $2.9 billion. It said its full-year net loss would be $2.4 billion on sales of $10.8 billion.

Its stock, which has plunged more than 90 per cent in the last five years, fell as much as 8 per cent after the news. Shares later regained some of that ground, and were down about 1 per cent at C$3.57 on the Toronto Stock Exchange and at $3.07 in New York.

''When they have these accounting issues it makes it very difficult to develop the kind of trust they need from investors and customers and workers,'' said independent telecommunications analyst Jeff Kagan. ''They shot themselves in the foot again.'' This will be the third time in less than three years that Nortel has been forced to fix its results, a saga that started in November 2003, when it first uncovered accounting errors. Nortel said on Friday there are no signs of malfeasance with this restatement.

Nortel Chief Financial Officer Peter Currie said that companies are restating results more often due to more stringent accounting rules and shareholder diligence.

The company, which detected the current problems ''a few days ago'', said cannot guarantee it won't need further bookkeeping fixes.

''We cannot give assurances that a restatement will never happen again,'' said Chief Executive Mike Zafirovski, the former No. 2 at Motorola who took Nortel's top job in November. ''Certainly we believe we are minimising the chances of further restatements.'' At the same time, Nortel unveiled a plan that targets operating margin expansion in excess of $1.5 billion in 2008, as part of a plan to build shareholder value.

''The proof will be in the upcoming results,'' Zafirovski said.

''It's going to take three to five years to re-create a great company.'' Analysts said fourth-quarter sales are slightly below expectations, suggesting that the company has lost market share, but that Nortel's growth forecast appears healthy.

Nortel said it expects revenue ''momentum'' in the second half of the year, resulting in 2006 sales growth in the mid to high single digit range over 2005. Gross margin is seen in the low 40-per cent range, with operating expenses flat over 2005.

Still the subject of U.S. and Canadian criminal and regulatory probes for its earlier accounting troubles, Nortel said the restatement is primarily to correct revenue recognition mistakes.

''We get the sense that things are now being accounted for appropriately in the right quarter. Hopefully, Nortel will exercise increased financial rigour going forward,'' said RBC Capital Markets analyst Mark Sue.

The problems were uncovered during an extensive contract review and audit of 2005 results. Fixing the mistakes is ''different from the last time we restated, because the scope is a lot narrower,'' Currie said.

Nortel, which will delay filing its 2005 annual report until late April, said it expects the restatements will trim 2003 revenue by $157 million and earnings by $91 million. Revenue in 2004 will be hit by $77 million and earnings by $93 million.

For the first nine months of 2005, the restatement will strip $162 million from revenue and $95 million from earnings.

In results for periods before 2003, Nortel expects revisions to cut revenue by $470 million and earnings by $99 million.

''This revenue is real - it was recognised in the wrong periods,'' said Zafirovski in a statement. ''The restatements do not affect the company's cash position.'' Brampton, Ontario-based Nortel had to restate its financial results from 2001 through 2003 after uncovering a range of bookkeeping errors. It subsequently fired its top three executives, including CEO Frank Dunn. It finally brought its results up to date in May last year.

($1=$1.16 Canadian) REUTERS SD PM1525