NETWORKS

TORONTO, CANADA -- Nortel Networks Corporation (NYSE:NT) (TSX:NT.) today reconfirmed its expectation for improved pro forma net loss from continuing operations performance in the second quarter of 2002 compared to first quarter of 2002. The company said it now expects revenues in the second quarter of 2002 to be flat to down 5 percent, compared to the first quarter of 2002, updating its previous sequential revenue guidance of "not significantly up or down." Nortel Networks also announced plans to further realign its Optical Long Haul business, including optical components, to the current market conditions given that it does not expect a meaningful recovery in the long haul optical market before late 2003/early 2004. The company plans to streamline the business and focus on the capabilities that will be required when increased spending in the long haul optical market is expected to resume, including optical switching (OPTera HDX/DX), next generation photonic transport capabilities and end-to-end network management and intelligence. The plan includes the potential sale and/or resizing of the optical components business. "We are aligning our optical business model to where we see the industry going to ensure we are well positioned when spending resumes," said Frank Dunn, president and chief executive officer, Nortel Networks. "Optical backbone networks are the foundation of multimedia broadband networks and we expect Nortel Networks to remain an industry leading provider of end to end optical networking solutions. Going forward, we will focus on our leadership in optical systems and work with our partners to ensure ready access to high performance, low cost optical components." Dunn added, "Our focus is to bring all of our business units into a profitable position at the current market levels. These actions help to do that and will reduce our overall break even cost structure to approximately US$3.2 billion of quarterly revenues (not including costs related to acquisitions and any special charges or gains), down from the previous target of approximately US$3.5 billion. We expect this cost structure to be in place by the fourth quarter of 2002. We also continue to work closely with our customers and are seeing excellent acceptance of our market leading solutions, even in this difficult market, particularly in next generation wireless networks, enterprise solutions, metro optical and voice over packet." The realignment of the Optical Long Haul business, including optical components, is expected to be completed by the end of the third quarter of 2002 and is intended to impact approximately 3,500 related positions. Nortel Networks plans to record charges of approximately US$600 million, the majority of which is expected to be recorded in the second and third quarters of 2002. The cash component of this charge is expected to be up to US$200 million. These charges are incremental to the expected charge of approximately US$150 million to be taken in the second quarter of 2002 related to previously announced workforce reductions. The company noted that, taking into account these announced plans, it has sufficient liquidity to fund these actions and its operations, and expects to be in compliance with its covenants under various bank facilities, all of which are undrawn. To further strengthen its balance sheet and supplement its liquidity, the company continues to consider opportunities to raise additional capital and may pursue an equity-based financing transaction as market conditions permit. Taking into consideration changes to previously anticipated divestiture plans and the completion of today's announced actions, some of which were considered in its previous headcount target estimate of 44,000, the company now expects a workforce of approximately 42,000. Going forward, Nortel Networks will continue to monitor the market and adjust its business model, as appropriate, in its drive to return to profitability in the near term. For further information visit www.nortelnetworks.com.