NETWORKS

TORONTO, CANADA -- Nortel Networks Corporation (NYSE:NT) (TSE:NT.) today reported results for the fourth quarter and the year 2001. The company mentioned that its efforts in the quarter in its three businesses continued to generate positive momentum. Fourth Quarter 2001 Results Revenues from continuing operations were US$3.46 billion for the fourth quarter of 2001 compared to US$8.20 billion in the same period in 2000. Pro forma net loss from continuing operations for the fourth quarter of 2001 was US$506 million or US$0.16 per common share, compared to pro forma net earnings from continuing operations of US$929 million or US$0.29 per common share, on a diluted basis, in the fourth quarter of 2000. Pro forma net loss from continuing operations for the fourth quarter of 2001 excluded certain items including: Acquisition Related Costs of US$482 million (after tax); the loss on sale of businesses of US$215 million (after tax) primarily related to the writedown of the carrying value of certain assets identified for disposition; and special charges of US$605 million (after tax) primarily related to previously announced workforce reductions and associated facilities closures. Nortel Networks reported a net loss in the fourth quarter of 2001 of US$1.83 billion or US$0.57 per common share. "Revenues for the fourth quarter of 2001 reflected the reduced levels of spending in the global telecom industry which impacted all of our businesses," said Frank Dunn, president and chief executive officer, Nortel Networks. "Our bottom line results, compared to third quarter of 2001, were driven by a lower cost structure due to the impact of our re-sizing efforts and improved gross margin, reflecting our focus on our high value portfolio." Terry Hungle, chief financial officer, Nortel Networks said, "Revenues for the fourth quarter were in line with our expectations, while our reported bottom line results were better than expected due to gains on sales of businesses which closed late in the quarter. Our cash management focus resulted in a strong cash balance which increased from the third quarter." Dunn added, "Our efforts in the quarter in our three businesses continued to generate positive momentum: -- Our commitment to work closely with both service provider and enterprise customers to provide the right solutions to meet their needs resulted in key contract wins and milestones, including: -- Multi-year contracts, for soft switch deployments for Voice over IP transformations at Qwest and Sprint, -- Network wide deployments of Metro Optical DWDM and next generation SONET solutions were announced with SBC and Telus in North America, and KDDI and ACCA Networks in Japan, -- Core packet backbone contracts were announced with Vodafone, Verizon and T-Mobile, and -- Nortel Networks gained share in Ethernet switching and achieved the No. 2 position in the Layer 3 and Layer 4-7 switching segments, and maintained the lead position in the Fixed Layer 4-7 switching market according to Dell-Oro; and -- Our strategic investments to drive leadership solutions resulted in a number of portfolio milestones, including: -- OPTera HDX went into lab trials with two customers in North America, -- first live UMTS voice call using 3GPP standard and first multi-vendor UMTS 3GPP calls, -- first CDMA 1XRTT call carrying voice and data in Latin America, -- the CS 2000 Compact became available, a compact version of our carrier soft switch running on a commercial platform from Motorola, and -- several enhancements to our security offerings were launched which set new benchmarks in security performance, including the Alteon Switched Firewall and the Alteon Security Cluster." Commenting on the outlook for Nortel Networks, Dunn said, "At this time, market visibility remains limited given the uncertainty of the economic downturn and its impact on our customers' businesses and spending plans. As a result, we expect customers to move cautiously in the near term while maintaining the flexibility to increase spending in the future. We currently expect our revenues in the first quarter of 2002 will be lower than the fourth quarter of 2001 by approximately 10 percent. For the year 2002, we expect a gradual growth in revenues beginning in the second quarter. With respect to our bottom line performance, we expect an ongoing steady improvement from our fourth quarter 2001 performance and to return to profitability in the fourth quarter of 2002. We believe Nortel Networks is well positioned in the current market environment given our re-sized organization, our focus on three businesses, and the strong management team that is in place."