Nortel Reports Results for the Second Quarter 2006

Toronto (ots/PRNewswire) -

- Q2 Revenues of US$2.74 billion, Up 5 Percent Year Over Year

- Q2 Net Earnings of US$366 Million, US$0.08 per Common Share on a
Diluted Basis(x)

- Q2 Cash Balance of US$1.90 Billion

Nortel Networks(xx) Corporation (NYSE: NT; TSX: NT) today
announced that it and its principal operating subsidiary Nortel
Networks Limited (NNL) have reported their unaudited financial
results for the second quarter of 2006 prepared in accordance with
accounting principles generally accepted in the United States. All
dollar amounts included are in US dollars.

Second Quarter 2006 Results

---------------------------

Revenues were US$2.74 billion for the second quarter of 2006
compared to US$2.62 billion for the second quarter of 2005 and
US$2.38 billion for the first quarter of 2006. The Company reported
net earnings in the second quarter of 2006 of US$366 million, or
US$0.08 per common share on a diluted basis, compared to a net loss
of US$33 million, or (US$0.01) per common share on a diluted basis,
in the second quarter of 2005 and a net loss of US$167 million, or
(US$0.04) per common share on a diluted basis, in the first quarter
of 2006.

Net earnings in the second quarter of 2006 included a shareholder
litigation recovery of US$510 million reflecting a mark-to-market
adjustment of the share portion of the global class action
settlement, special charges of US$45 million for restructuring and a
loss of US$10 million on the sale of assets. Net loss in the second
quarter of 2005 included special charges of US$92 million related to
restructuring activities and US$11 million of costs related to the
sale of businesses and assets. Net loss in the first quarter of 2006
included a benefit of US$35 million in gains on the sale of
businesses and assets and a shareholder litigation expense of US$19
million reflecting a mark-to-market adjustment.

"Our second quarter performance underscores both the challenges
and good progress we are making with Nortel's transformation. On the
plus side we saw strong order growth of 22% and increased sales
momentum but gross margin was up only modestly and not at the 40%
target we have set for ourselves," said Mike Zafirovski, president
and chief executive officer, Nortel. "We remain intensely focused on
delivering improved financial performance and there's solid traction
on significant business transformation initiatives including the
go-to-market supporting our Enterprise business, the development of
our Services business, our strategic alliance with Microsoft, and
across the board cost management programs. Together, these efforts
are enabling us to deliver greater customer value and substantially
enhance Nortel's competitiveness."

Breakdown of Second Quarter 2006 Revenues

Mobility and Converged Core Networks revenues were US$1.59
billion, an increase of 7 percent compared with the year-ago quarter
and an increase of 12-percent sequentially. Enterprise Solutions and
Packet Networks revenues were US$1.07 billion, a decrease of 1
percent compared with the year-ago quarter and an increase of 23
percent sequentially. Deferred revenues decreased sequentially by
US$14 million and backlog increased by approximately US$194-million.

Gross margin

Gross margin was 39 percent of revenue in the second quarter of
2006, primarily impacted by geographic and product mix, and
competitive pricing pressures. This compares to gross margin of 43
percent for the second quarter of 2005 and 38 percent for the first
quarter of 2006. Compared to the second quarter of 2005, gross margin
was impacted primarily by pricing pressures and unfavourable product
mix, which was partially offset by higher sales volumes.

Selling, general and administrative (SG&A)

SG&A expenses were US$596 million in the second quarter of 2006,
reflecting incremental costs related to our acquisition of PEC and
the LG-Nortel joint venture and unfavorable foreign exchange impacts,
offset by cost containment initiatives. This compares to SG&A
expenses of US$588 million for the second quarter of 2005, and US$595
million for the first quarter of 2006.

Research and development (R&D)

R&D expenses were US$489 million in the second quarter of 2006,
reflecting increased investment in targeted product areas, the
consolidation of the LG-Nortel joint venture and unfavorable foreign
exchange impacts, offset by the favorable impact of the savings
associated with our 2004 restructuring program. This compares to
US$488 million for the second quarter of 2005 and US$478-million for
the first quarter of 2006.

Special Charges

Special charges in the second quarter of 2006 of US$45 million
included US$43-million for the restructuring program announced June
27, 2006.

Other income (expense) - net

Other income (expense) - net was net income of US$51 million for
the second quarter of 2006, which primarily related to investment
income of US$29 million and foreign exchange gains of US$16 million.

Cash

Cash balance at the end of the second quarter of 2006 was US$1.90
billion, down from US$2.70 billion at the end of the first quarter of
2006. This decrease in cash was primarily driven by an outflow of
US$580 million (US$575 million plus accrued interest of US$5 million)
deposited into escrow on June 1, 2006 pursuant to the global class
action settlement (pending satisfactory completion of all conditions)
and US$150 million for the repayment at maturity of the outstanding
aggregate principal amount of the 7.40% Notes due June 15, 2006 and a
cash outflow from operations of US$108 million, partially offset by
cash proceeds of US$70 million related to the Flextronics transfer.

On July 5, 2006, Nortel announced the closing of the offering of
US$2-billion aggregate principal amount of senior notes and that it
has used US$1.3-billion of the proceeds to prepay the US$1.3 billion
one-year credit facility that it entered into in February 2006.

First Half 2006 Results

For the first half of 2006, revenues were US$5.13 billion compared
to US$5.01-billion for the same period in 2005. The Company reported
net earnings for the first half of 2006 of US$199 million, or US$0.05
per common share on a diluted basis, compared to a net loss of US$137
million, or (US$0.03) per common share on a diluted basis, for the
same period in 2005.

Net earnings in the first half of 2006 included a shareholder
litigation recovery of US$491 million reflecting a mark-to-market
adjustment of the share portion of the global class action
settlement, special charges of US$50 million related to restructuring
activities and a benefit of US$25 million related to the sale of
businesses and assets. The first half 2005 results included special
charges of US$106 million related to restructuring activities and
US$33-million of costs related to the sale of businesses and assets.

Outlook(a)

----------

Commenting on the Company's financial expectations, Peter Currie,
executive vice president and chief financial officer, Nortel, said,
"For the full year 2006, we continue to expect strong revenue
momentum for the rest of 2006, resulting in high single digit growth
for the full year 2006 compared to 2005, gross margin to be around
40% as a percentage of revenue and operating expenses to be flat to
up slightly from 2005, with foreign exchange and growth related
expenses offsetting productivity and efficiencies. For the third
quarter of 2006, we expect revenue growth in excess of 10 percent
compared to the third quarter of 2005 and gross margin and operating
expenses to be in-line with our full year guidance."

(a) The Company's financial outlook contains forward-looking information
and as such, is based on certain assumptions, and is subject to
important risk factors and uncertainties (which are summarized in
italics at the end of this press release) that could cause actual
results or events to differ materially from this outlook.

Recent Business Highlights

--------------------------

New Strategic Relationships

Nortel and Microsoft announced a strategic alliance to accelerate
the transformation of business communications towards a shared vision
for unified communications. The agreement engages the companies at
the technology, marketing and business levels and includes joint
product development, solutions and systems integration, and
go-to-market initiatives.

Liberty Global, the world's leading international cable operator,
has signed a 3-year global purchase agreement with Nortel for cable
VoIP and optical solutions and services. With this agreement, Nortel
is now an approved vendor across Liberty Global's cable subsidiaries
that serve 15 million customers in 18 countries around the world.

Nortel Government Solutions has teamed up with NextiraOne Federal
to work together to propose joint solutions for the US Army
Infrastructure Modernization program (IMOD). NextiraOne Federal, an
authorized Nortel reseller, was awarded one of 10 Indefinite
Delivery/Indefinite Quantity contracts to provide converged voice and
data solutions for bases worldwide under the US Army IMOD program. In
addition, Fortress Technologies and Nortel Government Solutions have
formed a strategic relationship to provide government agencies
worldwide with a joint solution for secure wireless voice, video and
data networking.

Revenue Momentum

Nortel's enterprise customer momentum has resulted in new
customers such as: Hong Kong Exchanges and Clearing Ltd., one of
Asia's largest international stock exchanges, China's University of
Petroleum to improve communications and ensure easy online access to
advanced learning resources for 40,000 students, Israel's Migdal
Insurance and Financial Holdings Ltd., Macquarie University in
Australia for a network security solution from Nortel, and Langham
Hotel Hong Kong for IP phone systems.

The Bahamas Telecommunications Company Ltd. (BTC), the primary
telecom operator in the Bahamas will deploy network enhancements to
extend the availability of next-generation, voice, data and
multimedia services with Nortel GSM/GPRS wireless technology. The
GSM/GPRS solution from Nortel will enable BTC to achieve operational
efficiencies through reduced network complexity and operating
expenses as well as the availability to introduce new services
quickly.

Nortel's Global Services will provide full lifecycle services for
the Rolls-Royce telephone network under a seven-year management
services agreement. Rolls-Royce will transform its entire telephone
network into a single, advance network providing VoIP services based
on Nortel solutions including the Nortel Communication Server 1000
and Nortel CallPilot for unified voice, fax and e-mail accessible
from any location, and Nortel mobility services. Nortel Global
Services will also provide network design, integration, management
and maintenance services to Suddenlink Communications, one of the 10
largest cable operators in the United States. Suddenlink will provide
VoIP-based telephony services based on Nortel PacketCable-qualified
Communications Server 2000-Compact as the exclusive softswitch on
their Suddenlink backbone.

Recent momentum in Nortel's Government Solutions business includes
selection by the US Department of Homeland Security for program
management, acquisition and administrative services to the US
Citizenship and immigration Service, and a contract for systems
engineering and software development for ground systems with the US
National Oceanic and Atmospheric Administration.

Russia's alternative telecommunications service provider Pride has
launched 'triple play' voice, video and multimedia services with a
newly deployed Metro Ethernet network from Nortel. The solution is
based on Nortel's Metro Ethernet portfolio and enables Pride to make
available services such as IPTV with video on demand; VoIP; and
high-speed Internet access.

Leading Next-Generation Solutions

Nortel has been selected to supply Verizon Wireless with one of
the industry's most advanced CDMA 1xEV-DO Revision A technology
beginning in the third quarter of 2006. This upgrade will provide
data speeds significantly faster than current capabilities and meet
customer demand for more high-bandwidth, real-time wireless services
such as VoIP, video telephony and advanced multimedia applications.

KTF, one of South Korea's leading cellular providers, has launched
a next-generation ultra high speed 3.5G wireless network in Seoul and
cities across South Korea using wireless broadband technology from
LG-Nortel. The network supports advanced handset capabilities
including high-definition video, video chatting, messaging and remote
monitoring.

About Nortel

Nortel is a recognized leader in delivering communications
capabilities that enhance the human experience, ignite and power
global commerce, and secure and protect the world's most critical
information. Our next-generation technologies, for both service
providers and enterprises, span access and core networks, support
multimedia and business-critical applications, and help eliminate
today's barriers to efficiency, speed and performance by simplifying
networks and connecting people with information. Nortel does business
in more than 150 countries. For more information, visit Nortel on the
Web at www.nortel.com. For the latest Nortel news, visit
www.nortel.com/news.

Certain statements in this press release may contain words such as
"could", "expects", "may", "anticipates", "believes", "intends",
"estimates", "plans", "envisions", "seeks" and other similar language
and are considered forward-looking statements or information under
applicable securities legislation. These statements are based on
Nortel's current expectations, estimates, forecasts and projections
about the operating environment, economies and markets in which
Nortel operates. These statements are subject to important
assumptions, risks and uncertainties, which are difficult to predict
and the actual outcome may be materially different. Nortel has made
various assumptions in the preparation of its financial outlook in
this press release, including the following company specific
assumptions: no further negative impact to Nortel's results of
operations, financial condition and liquidity arising from Nortel's
restatements of its financial results; Nortel's prices increasing at
or above the rate of price increases for similar products in
geographic regions in which Nortel sells its products; increase in
sales to Nortel's enterprise customers and wireless service provider
customers in the Asia Pacific region as a result of Nortel's joint
venture with LG Electronics Inc.; anticipated growth in sales to
enterprise customers, including the full year impact to Nortel's
revenues from its acquisition of PEC Solutions, Inc., (now Nortel
Government Solutions Incorporated); improvement in Nortel's product
costs due to favorable supplier pricing substantially offset by
higher costs associated with initial customer deployments in emerging
markets; cost reductions resulting from the completion of Nortel's
significant financial restatements and 2004 restructuring plan; a
moderate increase in costs over 2005 related to investments in the
finance organization and remedial measures related to Nortel's
material weaknesses in internal controls; increased employee costs
relative to expected cost of living adjustments and employee bonuses
offset by a significant reduction in executive recruitment and
severance costs incurred in 2005; and the effective execution of
Nortel's strategy. Nortel has also made certain macroeconomic and
general industry assumptions in the preparation of its financial
guidance including: a modest growth rate in the gross domestic
product of global economies in the range of 3.2% which is unchanged
from the growth rate in 2005; global service provider capital
expenditures in 2006 reflecting flat to low single digit growth as
compared to low double digit growth in 2005; a general increase in
demand for broadband access, data traffic and wireless infrastructure
and services in emerging markets with the rate of growth in developed
markets beginning to slow; and a moderate impact as a result of
expected industry consolidation among service providers in various
geographic regions, particularly in North America and EMEA. The above
assumptions, although considered reasonable by Nortel at the date of
this press release, may prove to be inaccurate and consequently
Nortel's actual results could differ materially from its expectations
set out in this press release.

Further, actual results or events could differ materially from
those contemplated in forward-looking statements as a result of the
following (i) risks and uncertainties relating to Nortel's
restatements and related matters including: Nortel's most recent
restatement and two previous restatements of its financial statements
and related events; the negative impact on Nortel and NNL of their
most recent restatement and delay in filing their financial
statements and related periodic reports; legal judgments, fines,
penalties or settlements, or any substantial regulatory fines or
other penalties or sanctions, related to the ongoing regulatory and
criminal investigations of Nortel in the US and Canada; any
significant pending civil litigation actions not encompassed by
Nortel's global class action settlement; any substantial cash payment
and/or significant dilution of Nortel's existing equity positions
resulting from the approval of its global class action settlement, or
if such global class action settlement is not approved, any larger
settlements or awards of damages in respect of such class actions;
any unsuccessful remediation of Nortel's material weaknesses in
internal control over financial reporting resulting in an inability
to report Nortel's results of operations and financial condition
accurately and in a timely manner; the time required to implement
Nortel's remedial measures; Nortel's inability to access, in its
current form, its shelf registration filed with the United States
Securities and Exchange Commission (SEC), and Nortel's below
investment grade credit rating and any further adverse effect on its
credit rating due to Nortel's restatements of its financial
statements; any adverse affect on Nortel's business and market price
of its publicly traded securities arising from continuing negative
publicity related to Nortel's restatements; Nortel's potential
inability to attract or retain the personnel necessary to achieve its
business objectives; any breach by Nortel of the continued listing
requirements of the NYSE or TSX causing the NYSE and/or the TSX to
commence suspension or delisting procedures; (ii) risks and
uncertainties relating to Nortel's business including: yearly and
quarterly fluctuations of Nortel's operating results; reduced demand
and pricing pressures for its products due to global economic
conditions, significant competition, competitive pricing practice,
cautious capital spending by customers, increased industry
consolidation, rapidly changing technologies, evolving industry
standards, frequent new product introductions and short product life
cycles, and other trends and industry characteristics affecting the
telecommunications industry; any material and adverse affects on
Nortel's performance if its expectations regarding market demand for
particular products prove to be wrong or because of certain barriers
in its efforts to expand internationally; any reduction in Nortel's
operating results and any related volatility in the market price of
its publicly traded securities arising from any decline in its gross
margin, or fluctuations in foreign currency exchange rates; any
negative developments associated with Nortel's supply contract and
contract manufacturing agreements including as a result of using a
sole supplier for key optical networking solutions components, and
any defects or errors in Nortel's current or planned products; any
negative impact to Nortel of its failure to achieve its business
transformation objectives; additional valuation allowances for all or
a portion of its deferred tax assets; Nortel's failure to protect its
intellectual property rights, or any adverse judgments or settlements
arising out of disputes regarding intellectual property; changes in
regulation of the Internet and/or other aspects of the industry;
Nortel's failure to successfully operate or integrate its strategic
acquisitions, or failure to consummate or succeed with its strategic
alliances; any negative effect of Nortel's failure to evolve
adequately its financial and managerial control and reporting systems
and processes, manage and grow its business, or create an effective
risk management strategy; and (iii) risks and uncertainties relating
to Nortel's liquidity, financing arrangements and capital including:
the impact of Nortel's most recent restatement and two previous
restatements of its financial statements; any inability of Nortel to
manage cash flow fluctuations to fund working capital requirements or
achieve its business objectives in a timely manner or obtain
additional sources of funding; high levels of debt, limitations on
Nortel capitalizing on business opportunities because of credit
facility covenants, or on obtaining additional secured debt pursuant
to the provisions of indentures governing certain of Nortel's public
debt issues and the provisions of its credit facilities; any increase
of restricted cash requirements for Nortel if it is unable to secure
alternative support for obligations arising from certain normal
course business activities, or any inability of Nortel's subsidiaries
to provide it with sufficient funding; any negative effect to Nortel
of the need to make larger defined benefit plans contributions in the
future or exposure to customer credit risks or inability of customers
to fulfill payment obligations under customer financing arrangements;
any negative impact on Nortel's ability to make future acquisitions,
raise capital, issue debt and retain employees arising from stock
price volatility and further declines in the market price of Nortel's
publicly traded securities, or any future share consolidation
resulting in a lower total market capitalization or adverse effect on
the liquidity of Nortel's common shares. For additional information
with respect to certain of these and other factors, see Nortel's
Annual Report on Form 10-K/A, Quarterly Report on Form 10-Q and other
securities filings with the SEC. Unless otherwise required by
applicable securities laws, Nortel disclaims any intention or
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.

--------------------

(x) Q2 net earnings of US$366 million included a shareholder litigation
recovery of US$510 million reflecting a mark-to-market adjustment of
the share portion of the global class action settlement
(xx) Nortel, the Nortel logo and the Globemark are trademarks of Nortel
Networks.
Nortel will host a teleconference/audio webcast to discuss Second Quarter
2006 Results.
TIME: 8:00 AM - 9:00 AM EDT on Thursday, August 3, 2006
To participate, please call the following at least 15 minutes prior to
the start of the event.
Teleconference: Webcast:
North America: 1-888-211-4395 http://www.nortel.com/q2earnings2006
International: 1-212-231-6007
Replay:
(Available one hour after the conference call)
North America: 1-800-383-0935 Passcode: 21300712
followed by the number sign
International: 1-402-530-5545 Passcode: 21300712
followed by the number sign
Webcast: http://www.nortel.com/q2earnings2006

NORTEL NETWORKS CORPORATION
Condensed Consolidated Statements of Operations (unaudited)
(US GAAP; Millions of US dollars, except per share amounts)
Three months ended Six months ended
----------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
----------------------------- -------------------
As As
restated restated
Revenues $ 2,744 $ 2,382 $ 2,619 $ 5,126 $ 5,008
Cost of revenues 1,678 1,474 1,485 3,152 2,862
----------------------------- -------------------
Gross profit 1,066 908 1,134 1,974 2,146
Selling, general and
administrative expense 596 595 588 1,191 1,166
Research and development
expense 489 478 488 967 962
Amortization of
intangibles 6 5 2 11 4
In-process research and
development expense 16 - - 16 -
Special charges 45 5 92 50 106
(Gain) loss on sale of
businesses and assets 10 (35) 11 (25) 33
Shareholder litigation
settlement (recovery)
expense (510) 19 - (491) -
----------------------------- -------------------
Operating earnings (loss) 414 (159) (47) 255 (125)
Other income - net 51 69 74 120 128
Interest expense
Long-term debt (59) (46) (51) (105) (101)
Other (11) (24) (1) (35) (4)
----------------------------- -------------------
Earnings (loss) from
continuing operations
before income taxes,
minority interests and
equity in net earnings
(loss) of associated
companies 395 (160) (25) 235 (102)
Income tax benefit
(expense) (27) (23) 9 (50) (7)
----------------------------- -------------------
368 (183) (16) 185 (109)
Minority interests -
net of tax 1 9 (17) 10 (31)
Equity in net earnings
(loss) of associated
companies - net of tax (3) (2) 1 (5) 2
----------------------------- -------------------
Net earnings (loss) from
continuing operations 366 (176) (32) 190 (138)
Net earnings (loss) from
discontinued operations
- net of tax - - (1) - 1
----------------------------- -------------------
Net earnings (loss)
before cumulative effect
of accounting change 366 (176) (33) 190 (137)
Cumulative effect of
accounting change
- net of tax - 9 - 9 -
----------------------------- -------------------
Net earnings (loss) $ 366 $ (167) $ (33) $ 199 $ (137)
----------------------------- -------------------
----------------------------- -------------------
Average shares
outstanding (millions)
- Basic 4,339 4,339 4,338 4,339 4,338
Average shares
outstanding (millions)
- Diluted 4,340 4,339 4,338 4,342 4,338
Basic and diluted
earnings (loss)
per common share
- from continuing
operations $ 0.08 $ (0.04) $ (0.01) $ 0.05 $ (0.03)
- from discontinued
operations 0.00 0.00 (0.00) 0.00 0.00
----------------------------- -------------------
Basic earnings (loss)
per common share $ 0.08 $ (0.04) $ (0.01) $ 0.05 $ (0.03)
----------------------------- -------------------
----------------------------- -------------------
Please refer to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 including the Notes to the Unaudited Condensed Consolidated
Financial Statements.

NORTEL NETWORKS CORPORATION
Condensed Consolidated Balance Sheets (unaudited)
(US GAAP; Millions of US dollars, except for share amounts)
--------------------------------------
June 30, March 31, December 31,
2006 2006 2005
------------ ------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 1,904 $ 2,695 $ 2,951
Restricted cash and cash
equivalents 646 77 77
Accounts receivable - net 2,785 2,620 2,862
Inventories - net 2,035 1,984 1,804
Deferred income taxes - net 348 388 377
Other current assets 833 823 796
------------ ------------ ------------
Total current assets 8,551 8,587 8,867
Investments 209 246 244
Plant and equipment - net 1,574 1,531 1,564
Goodwill 2,588 2,680 2,592
Intangible assets - net 205 166 172
Deferred income taxes - net 3,728 3,606 3,629
Other assets 971 1,025 1,044
------------ ------------ ------------
Total assets $ 17,826 $ 17,841 $ 18,112
------------ ------------ ------------
------------ ------------ ------------

LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Trade and other accounts payable $ 1,065 $ 1,069 $ 1,180
Payroll and benefit-related
liabilities 861 778 801
Contractual liabilities 258 297 346
Restructuring liabilities 111 84 95
Other accrued liabilities 4,517 4,384 4,200
Long-term debt due within one year 18 168 1,446
Loan Payable - 1,300 -
------------ ------------ ------------
Total current liabilities 6,830 8,080 8,068
Long-term debt 3,752 2,445 2,439
Deferred income taxes - net 107 109 104
Other liabilities 5,238 5,778 5,935
------------ ------------ ------------
Total liabilities 15,927 16,412 16,546
------------ ------------ ------------
Minority interests in subsidiary
companies 738 754 780
SHAREHOLDERS' EQUITY
Common shares, without par value -
Authorized shares: unlimited;
Issued and outstanding shares:
4,339,368,770 as of June 30,
2006, 4,339,337,625 as of
March 31, 2006 and 4,339,162,932
as of December 31, 2005 33,932 33,935 33,932
Additional paid-in capital 3,326 3,295 3,281
Accumulated deficit (35,326) (35,692) (35,525)
Accumulated other comprehensive loss (771) (863) (902)
------------ ------------ ------------
Total shareholders' equity 1,161 675 786
------------ ------------ ------------
Total liabilities and shareholders'
equity $ 17,826 $ 17,841 $ 18,112
------------ ------------ ------------
------------ ------------ ------------
Please refer to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 including the Notes to the Unaudited Condensed Consolidated
Financial Statements.

NORTEL NETWORKS CORPORATION
Condensed Consolidated Statements of Cash Flows (unaudited)
(US GAAP; Millions of US dollars)
Three months ended Six months ended
----------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
----------------------------- -------------------
As As
restated restated
Cash flows from (used in)
operating activities
Net earnings (loss) $ 366 $ (167) $ (33) $ 199 $ (137)
Adjustments to
reconcile net earnings
(loss) to net cash
from (used in)
operating activities
from continuing
operations, net of
effects from
acquisitions and
divestitures of
businesses:
Amortization and
depreciation 76 60 79 136 160
Non-cash portion
of shareholder
litigation
settlement recovery (510) 19 - (491) -
Non-cash portion of
special charges
and related asset
write downs - - 2 - 2
Non-cash portion of
in-process research
and development
expense 16 - - 16 -
Equity in net
(earnings) loss of
associated companies 3 2 (1) 5 (2)
Stock option
compensation 28 25 18 53 36
Deferred income taxes 38 16 4 54 12
Cumulative effect of
accounting change - (9) - (9) -
Net (earnings) loss
from discontinued
operations - - 1 - (1)
Other liabilities 86 73 102 159 181
(Gain) loss on sale
or write down of
investments,
businesses and assets 8 (34) (10) (26) 17
Other - net 183 103 30 286 (77)
Change in operating
assets and
liabilities (402) (262) (82) (664) (344)
----------------------------- --------- ---------
Net cash from (used in)
operating activities
of continuing
operations (108) (174) 110 (282) (153)
----------------------------- --------- ---------
Cash flows from (used in)
investing activities
Expenditures for plant
and equipment (78) (99) (70) (177) (124)
Proceeds on disposals
of plant and equipment 2 87 10 89 10
Restricted cash and
cash equivalents (570) 3 8 (567) 9
Acquisitions of
investments and
businesses - net
of cash acquired (4) (121) (446) (125) (448)
Proceeds on sale of
investments and
businesses 81 30 84 111 167
----------------------------- --------- ---------
Net cash from (used in)
investing activities
of continuing
operations (569) (100) (414) (669) (386)
----------------------------- --------- ---------
Cash flows from (used in)
financing activities
Dividends paid by
subsidiaries to
minority interests (13) (18) (10) (31) (24)
Increase in notes
payable 23 4 18 27 38
Decrease in notes
payable (9) (3) (20) (12) (46)
Borrowings in loan
payable - 1,300 - 1,300 -
Repayments of long-
term debt (150) (1,275) - (1,425) -
Decrease in capital
leases payable (4) (5) (4) (9) (5)
Issuance of common
shares - 1 1 1 1
----------------------------- --------- ---------
Net cash from (used in)
financing activities
of continuing
operations (153) 4 (15) (149) (36)
----------------------------- --------- ---------
Effect of foreign
exchange rate changes
on cash and cash
equivalents 39 14 (50) 53 (85)
----------------------------- --------- ---------
Net cash from (used in)
continuing operations (791) (256) (369) (1,047) (660)
Net cash from (used in)
operating activities
of discontinued
operations - - (2) - 34
----------------------------- --------- ---------
Net increase (decrease)
in cash and cash
equivalents (791) (256) (371) (1,047) (626)
Cash and cash equivalents
at beginning of period 2,695 2,951 3,430 2,951 3,685
----------------------------- --------- ---------
Cash and cash equivalents
at end of period $ 1,904 $ 2,695 $ 3,059 $ 1,904 $ 3,059
----------------------------- --------- ---------
----------------------------- --------- ---------
Please refer to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 including the Notes to the Unaudited Condensed Consolidated
Financial Statements.

NORTEL NETWORKS CORPORATION
Consolidated Financial Information (unaudited)
(US GAAP; Millions of US dollars)
Segmented revenues
The following table summarizes our revenue by segment for:
Three months ended Six months ended
----------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
----------------------------- -------------------
As As
restated restated
Revenues
Mobility and Converged
Core Networks $ 1,591 $ 1,426 $ 1,484 $ 3,017 $ 2,970
Enterprise Solutions
and Packet Networks 1,068 871 1,074 1,939 1,952
----------------------------- -------------------
Total reportable segments 2,659 2,297 2,558 4,956 4,922
Other 85 85 61 170 86
----------------------------- -------------------
Total revenues $ 2,744 $ 2,382 $ 2,619 $ 5,126 $ 5,008
----------------------------- -------------------
----------------------------- -------------------

Geographic revenues
The following table summarizes our geographic revenues based on the
location of the customer for:
Three months ended Six months ended
----------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
----------------------------- -------------------
As As
restated restated
Revenues
United States $ 1,114 $ 1,132 $ 1,371 $ 2,246 $ 2,590
EMEA(a) 894 631 666 1,525 1,339
Canada 139 159 168 298 280
Asia 449 301 284 750 548
CALA(b) 148 159 130 307 251
----------------------------- -------------------
Total revenues $ 2,744 $ 2,382 $ 2,619 $ 5,126 $ 5,008
----------------------------- -------------------
----------------------------- -------------------
(a) Europe, Middle East and Africa
(b) Caribbean and Latin America

Network Solutions revenues
The following table summarizes our external revenues by category of
network solutions for each of our reportable segments for:
Three months ended Six months ended
----------------------------- -------------------
June 30, March 31, June 30, June 30, June 30,
2006 2006 2005 2006 2005
----------------------------- -------------------
As As
restated restated
Revenues
Mobility and Converged
Core Networks
CDMA solutions $ 588 $ 514 $ 620 $ 1,102 $ 1,154
GSM and UMTS solutions 723 633 565 1,356 1,278
Circuit and packet
voice solutions 280 279 299 559 538
----------------------------- -------------------
1,591 1,426 1,484 3,017 2,970
Enterprise Solutions
and Packet Networks
Circuit and packet
voice solutions 361 339 459 700 781
Optical networking
solutions 326 250 304 576 541
Data networking and
security solutions(a) 381 282 311 663 630
----------------------------- -------------------
1,068 871 1,074 1,939 1,952
Other 85 85 61 170 86
----------------------------- -------------------
Total revenues $ 2,744 $ 2,382 $ 2,619 $ 5,126 $ 5,008
----------------------------- -------------------
----------------------------- -------------------
(a) Includes $186, $194 and $171 of revenue from our enterprise customers
for the three months ended June 30, 2006 and 2005 and March 31, 2006,
respectively, and $357 and $395 for the first half of 2006 and 2005,
respectively.
Please refer to our Quarterly Report on Form 10-Q for the quarter ended
June 30, 2006 including the Notes to the Unaudited Condensed Consolidated
Financial Statements.

ots Originaltext: Nortel Networks
Im Internet recherchierbar: http://www.presseportal.de

Contact:
For further information: Media: Jay Barta, +1-972-685-2381,
jbarta@nortel.com; Investors: +1-888-901-7286, +1-905-863-6049,
investor@nortel.com