Nortel sells telecoms equipment in 150 countries

Nortel also said it was reviewing its earnings figures for the past three years, and profits for 2003 would be revised lower by about 50%.

The company's accounts are already under investigation by the US Securities and Exchange Commission.

Shares in the Toronto-based company fell 28% in early trade on Wednesday.

Mr Dunn has been replaced by William Owens, a Nortel board member and former senior US military figure.

Job cuts

The company's chief financial officer Douglas Beatty and controller Michael Gollogly were also fired. The two had been on paid leave of absence since 15 March.

Nortel added a further four executives have been put on paid leave of absence "pending further progress of the independent review".

The company confirmed the investigation into the company's finances was "ongoing".

Net earnings for 2003 are thought to have been overstated by 50% while losses for 2002 and 2001 were understated, Nortel said.

The company expanded rapidly in the late 1990s at the height of the telecom boom.

But after the industry contracted it was forced to carry out massive job cuts - the workforce which once almost reached 100,000 employees was reduced by two-thirds.

Shares in the firm peaked at $89 during the tech boom before crashing to below 50 cents in 2002. Before the start of trade on Wednesday they stood at $5.64.