Nortel to Delay Filing of its 2005 Annual Reports Until End of April 2006 and Restate Certain Prior Period Results

Toronto (ots/PRNewswire) -

NORTEL ANNOUNCES PRELIMINARY UNAUDITED Q4 AND YEAR 2005 RESULTS
- Financial restatements principally due to revenue incorrectly
recognized in prior periods that should have been deferred
- Preliminary unaudited Q4 2005 results include revenues of
US$2.9 billion, net loss of US$2.2 billion, including a US$2.5 billion
litigation expense, and cash balance of US$3.0 billion
- Preliminary unaudited year 2005 results include revenues of
US$10.8 billion and net loss of US$2.4 billion

www.nortel.com

Nortel (NYSE: NT; TSX: NT) today announced that it and its
principal operating subsidiary, Nortel Networks Limited ("NNL") are
delaying the filing with the U.S. Securities and Exchange Commission
("SEC") of their annual reports on Form 10-K for the year ended
December 31, 2005 (the "2005 Form 10- K") and their corresponding
filings under Canadian securities laws, and announced preliminary
unaudited fourth quarter and year 2005 results (in U.S. dollars and
in accordance with U.S. GAAP).

Nortel announced that it and NNL will restate their financial
results for 2003, 2004 and the first nine months of 2005, and will
have adjustments to periods prior to 2003, primarily due to revenue
incorrectly recognized in prior periods that should have been
deferred to future periods. The restatement adjustments were
identified primarily through an extensive contract review undertaken
as part of remedial efforts to compensate for previously reported
internal control deficiencies and through discussions with their
independent auditors as part of the audit of the 2005 financial
results.

The Company currently expects revisions to its previously reported
2003 and 2004 financial results reflecting negative impacts on
revenue of US$157 million and US$77 million and on net earnings/loss
of US$91 million and US$93 million, respectively, as well as
revisions to its previously reported 2005 nine month results
reflecting negative impacts on revenue of US$162 million and on net
earnings/loss of US$95 million in the aggregate. With respect to
financial results prior to 2003, the Company currently expects
revisions reflecting negative impacts on revenue of US$470 million
and on net earnings/loss of US$99 million, in the aggregate.

"Our priority is to have accurate financial information. Although
the need to restate certain financial statements is unfortunate, it's
the right thing to do. This revenue is real - it was recognized in
the wrong periods. The restatements do not affect the Company's cash
position," said Mike Zafirovski, president and chief executive
officer, Nortel. "The extensive contract review we undertook in 2005
underscores our commitment to ensure a solid foundation for this
Company going forward. Though it will take time, our unwavering
commitment to be among the top companies in the world in corporate
governance and business and financial controls remains."

The results set forth in this press release, including expected
restatement impacts, are preliminary and unaudited and reflect known
restatement adjustments. These results are subject to change as a
result of any adjustments arising from the restatement process,
subsequent events and the completion of the audit of the financial
statements by Nortel's independent auditors.

Preliminary Unaudited Fourth Quarter 2005 Results

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

Revenues were US$2.95 billion for the fourth quarter of 2005
compared to US$2.59 billion for the fourth quarter of 2004 and
US$2.62 billion for the third quarter of 2005. The Company reported
a net loss in the fourth quarter of 2005 of US$2.21 billion, or
US$0.51 per common share on a diluted basis, compared to net
earnings of US$107 million, or US$0.02 per common share on a diluted
basis, in the fourth quarter of 2004 and a net loss of US$110
million, or US$0.02 per common share on a diluted basis, in the third
quarter of 2005.

Net loss in the fourth quarter of 2005 included a litigation
expense of US$2,474 million, or US$0.57 per common share on a diluted
basis, as a result of an agreement reached in principle for the
proposed settlement of certain shareholder class action litigation
and a tax benefit of approximately US$140 million related to a
liability release as a result of a transfer pricing resolution. The
Company is in continuing mediation discussions regarding the proposed
settlement.

"2005 was an important year," said Zafirovski. "The business was
stabilized and we began to set the foundation for the future. Because
of Nortel's strong technology solutions and customer relationships,
we grew our business in 2005 for the first time in five years. We
are, however, certainly not satisfied with our financial results
which in my opinion have not been good in terms of growth, operating
margins and cash flows since 1998. We are working diligently to
rectify this and we expect that you will start to see improved
results during 2006."

Breakdown of Fourth Quarter 2005 Revenues

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

Carrier Packet Networks revenues were US$802 million, an increase
of 17 percent compared with the year-ago quarter and an increase of 2
percent sequentially. GSM and UMTS Networks revenues were US$755
million, an increase of 12 percent compared with the year-ago quarter
and an increase of 14 percent sequentially. CDMA Networks revenues
were US$741 million, an increase of 23 percent compared with the
year-ago quarter and an increase of 52 percent sequentially.
Enterprise Networks revenues were US$651 million, an increase of 3
percent compared with the year-ago quarter and a decrease of 5
percent sequentially.

Gross margin

Gross margin was 43 percent of revenue in the fourth quarter of
2005.

Selling, general and administrative (SG&A)

SG&A expenses were US$674 million in the fourth quarter of 2005,
which included costs of approximately US$38 million related to
executive recruitment and retirement and costs of approximately
US$50 million related to internal control remedial measures,
investment in the Company's finance processes and prior restatement
related activities. This compares to SG&A expenses of US$528 million
for the fourth quarter of 2004, which included bad debt recoveries
of US$80 million and US$67 million related to internal control
remedial measures and restatement activities, and US$584 million for
the third quarter of 2005, which included a cost of approximately
US$50 million related to internal control remedial measures,
investment in the Company's finance processes and restatement
related activities.

Research and development (R&D)

R&D expenses were US$450 million in the fourth quarter of 2005,
compared to US$491 million for the fourth quarter of 2004 and US$447
million for the third quarter of 2005. The fourth quarter of 2005
R&D expenses reflect increased investments in targeted product
areas, partially offset by the favorable impact of the savings
associated with our 2004 restructuring plan.

Other income (expense) - net

Other income - net was US$112 million, which primarily related to
a gain on the sale of an investment of US$45 million and investment
income of US$35 million.

Tax

The Company recorded an income tax recovery of US$101 million in
the fourth quarter of 2005, which primarily related to a tax benefit
of approximately US$140 million related to a liability release as a
result of a transfer pricing resolution, partially offset by income
tax expenses in profitable jurisdictions.

Cash

Cash balance at the end of the fourth quarter of 2005 was US$2.95
billion, compared to US$3.00 billion at the end of the third quarter
of 2005. Cash generated from operations in the fourth quarter of
2005 of US$118 million was primarily offset by US$127 million of
investment activities.

Preliminary Unaudited Year 2005 Results

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

In 2005, revenues were $10.83 billion compared to US$9.75 billion
for the year 2004. Nortel reported a net loss of US$2.41 billion, or
US$0.56 per common share on a diluted basis, for the year 2005,
compared to a net loss of US$144 million, or US$0.03 per common
share on a diluted basis, for the year 2004. The year 2005 results
included a litigation expense of US$2,474 million, as a result of
the agreement reached in principle for the proposed settlement of
certain shareholder class action litigation, special charges of
US$173 million related to restructuring activities and US$46 million
of costs related to the sale of businesses and assets.

Outlook (a)

-----------

"I am excited to be here at Nortel. This is a company with
terrific assets that just hasn't been operating as well as it could.
By improving our processes and cost structure, we will capitalize on
the strength of Nortel's technology, customer relationships and
dedicated employees to improve our performance," said Zafirovski.

Specifically commenting on the Company's financial expectations,
Peter Currie, executive vice president and chief financial officer,
Nortel, said, "We expect revenue momentum in the second half of 2006
resulting in mid to high single digit growth for the full year 2006
compared to 2005. For the full year, we expect gross margin to be in
the low 40s as a percentage of revenue and operating expenses to be
essentially flat compared to 2005 with inflation and growth related
expenses offsetting productivity and efficiencies."

(a) The Company's financial outlook contains forward-looking
information and, as such, is based on certain assumptions, and is
subject to important risks 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.

Restatements

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

As previously disclosed, the Company has continued to identify,
develop and implement the Board mandated remedial measures to address
the as yet unremedied material weaknesses in its internal control
over financial reporting that have been identified by the Company and
its independent auditors. As part of these remedial efforts to ensure
the reliability of its financial reporting, the Company has
undertaken intensive efforts in 2005 to validate its recognition of
revenue. The contract review and discussions with Nortel's
independent auditors referred to above have related primarily to the
Company's accounting for complex contractual arrangements under
American Institute of Certified Public Accountants Statement of
Position ("SOP") 81-1, "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts", and SOP
97-2, "Software Revenue Recognition". This work has resulted in the
determination that certain revenue recognized in prior periods should
have been deferred and recognized in future periods for contracts
involving multiple deliverable elements, including upon the delivery
of undelivered elements such as hardware, software and/or services.
As outlined above and subject principally to the audit of the
Company's financial statements by its independent auditors, the
Company currently expects revisions to its previously reported 2003
and 2004 financial results reflecting negative impacts on revenue of
US$157 million and US$77 million and on net earnings/loss of US$91
million and US$93 million, respectively, as well as revisions to its
previously reported 2005 nine month results reflecting negative
impacts on revenue of US$162 million and on net earnings/loss of
US$95 million in the aggregate. With respect to financial results
prior to 2003, the Company currently expects revisions reflecting
negative impacts on revenue of US$470 million and on net
earnings/loss of US$99 million in the aggregate. Pending the issuance
by the Company's and NNL's independent auditors of its audit
opinions in respect of Nortel's and NNL's restated financial
statements, the previously filed financial statements of Nortel and
NNL for such periods, including the corresponding interim financial
statements, and the auditors' reports on the respective annual
financial statements should not be relied upon.

The Company expects that full remediation of its material
weaknesses, ineffective internal control over financial reporting and
ineffective disclosure controls and procedures will continue to take
significant time and effort.

The Company expects to file its and NNL's 2005 Form 10-K by April
30, 2006 and any other required amendments to periodic reports for
prior periods thereafter.The Company and NNL will therefore file with
the SEC a Form 12b-25 Notification of Late Filing relating to the
delay in filing their 2005 Forms 10-K and indicating that the filings
will not be made within the 15-day extension period permitted by the
Form. The Company has notified the New York Stock Exchange and the
Toronto Stock Exchange of the delay in filing the 2005 Form 10-K. The
Company and NNL will provide bi-weekly updates on their affairs in
accordance with the alternate information guidelines of the Ontario
Securities Commission until they are current with their filing
obligations under Canadian securities laws.

Potential Impacts

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

Credit Facility; EDC Support Facility; Debt Securities

Since the Company will not be able to file its 2005 Form 10-K by
March 16, 2006, absent a waiver, an event of default will occur under
Nortel's US$1.3 billion one-year credit facility (the "2006 Credit
Facility"). As a result of this and certain other related breaches,
lenders holding greater than 50% of each tranche under the 2006
Credit Facility have the right to accelerate such tranche, and
lenders holding greater than 50% of all of the secured loans under
the 2006 Credit Facility have the right to exercise rights against
certain collateral. The entire US$1.3 billion under the 2006 Credit
Facility is currently outstanding. Nortel will request a temporary
waiver from the lenders while Nortel completes its filing
obligations. There can be no assurance that Nortel will receive such
a waiver.

In addition, as a result of a cross-default provision and other
related breaches, absent a waiver, Export Development Canada ("EDC")
will have the right to refuse to issue additional support and
terminate its commitments under the US$750 million support facility
(the "EDC Support Facility") or require that NNL cash collateralize
all existing support. As at March 8, 2005, there was approximately
US$161 million of outstanding support under this facility. NNL will
request a temporary waiver from EDC to permit continued access to the
facility while Nortel completes its filing obligations. There can be
no assurance that NNL will receive such a waiver.

Once the delay in filing the 2005 Form 10-K extends beyond March
31, 2006, the Company and NNL will not be in compliance with their
obligations to deliver their SEC filings to the trustees under their
public debt indentures. The delay in filing the 2005 Form 10-K will
not result in an automatic default and acceleration of such long-term
debt. Neither the trustee under any such public debt indenture nor
the holders of at least 25% of the outstanding principal amount of
any series of debt securities issued under the indentures will have
the right to accelerate the maturity of such debt securities unless
the Company or NNL, as the case may be, fails to file and deliver its
2005 Form 10-K within 90 days after the above mentioned holders have
given notice of such default to the Company or NNL. In addition, any
acceleration of the loans under the 2006 Credit Facility would result
in a cross-default under the public debt indentures that would give
the trustee under any such public debt indenture or the holders of at
least 25% of the outstanding principal amount of any series of debt
securities issued under the indentures the right to accelerate such
series of debt securities. Approximately US$500 million of debt
securities of NNL (or its subsidiaries) and US$1.8 billion of
convertible debt securities of the Company (guaranteed by NNL) are
currently outstanding under the indentures.

If an acceleration of the Company's and NNL's obligations were to
occur, the Company and NNL may be unable to meet their respective
payment obligations with respect to the related indebtedness. Nortel
and NNL are working with its lenders and EDC to obtain waivers.

Annual Shareholders' Meeting

The Company also announced, due to the delay in the filing of its
2005 financial statements, it is postponing its previously announced
Annual Shareholders' Meeting originally scheduled for May 2, 2006.
The postponement is required because Canadian law requires that the
Company's 2005 audited financial statements be placed before the
shareholders at the Annual Shareholders' Meeting, and SEC rules
require that the Company provide its 2005 audited financial
statements to shareholders either prior to or concurrently with the
mailing of the proxy materials for the meeting. The new date will be
announced, and the meeting will be held, as soon as practicable after
the filing of the 2005 Form 10-K.

Revenue Momentum

Momentum across Nortel's mobility portfolio including a three-year
contract with Cingular Wireless for GSM and UMTS wireless voice core
technologies, selection by Edge Wireless to expand its network and
begin UMTS and HSDPA 3G field trials, selection by the Alberta
Special Areas Board to build what is believed to be the first
commercial broadband wireless access network in Canada based on the
WiMAX IEEE 802.16-2004 standard, the announcements by Vivo Brazil,
Telecommunications Services of Trinidad and Tobago and Télébec
Mobilité for CDMA 2000 1X 3G network expansions, the deployment of a
Nortel wireless mesh network by The National Centre for Traditional
Arts in Taiwan, and the selection by Thales UK of Nortel's industry
leading GSM-R solution for the Channel Tunnel Rail link between
London and Folkestone.

Comcast, the world's largest cable operator, has joined Nortel's
significant family of cable customers including Time Warner Cable,
Cox, and Rogers. Comcast has chosen Nortel's next-generation optical
solutions for their national backbone project, including the Nortel
Common Photonic Layer (CPL) and Optical Multiservice Edge (OME) 6500
platforms as well as a full suite of implementation, integration and
support services.

Nortel demonstrated strong momentum domestically and
internationally with enterprise customer converged networks including
deployments for the U.S. corporate offices of Telstra, the Channel
Tunnel Rail Link in the UK, Ford Otosan in Turkey, KPN in the
Netherlands, HOT Telecom in Israel, a self- service solution for the
Orlando Airport and a business continuity/disaster recovery solution
for the Australian Stock Exchange. In addition, the Company provided
the telephony infrastructure for the Olympic games in Turin, Italy.
Nortel also announced contracts to support the networking
infrastructure of government entities, including the U.S. Postal
Office and the Census Bureau in the U.S., as well as international
deployments, such as China's West-East Gas Pipeline Project and the
Israeli Knesset, with IP telephony solutions.

Leading Next-Generation Solutions

Nortel continues to showcase its IMS solution and technical
leadership with the announcement of plans for commercial availability
in 2006 of Nortel's Call Session Control Function (CSCF), which is in
multiple global customer trials on the Advanced Telecom Computing
Architecture (aTCA). Nortel also continues to lead the market in
solution openness as it showcased its interoperability in the recent
Open Mobile Alliance (OMA) testfest in Montreal where Nortel
showcased interoperability between its IMS solution and IMS clients
and application/service enabler servers from multiple major vendors.
Nortel is the No. 1 Global Leader for the full year 2005 for Service
Provider VoIP according to Synergy Research Group, and the recent
selection by Movistar in Argentina and deployment by neuf Cegetel,
France's largest alternative operator of a VoIP solution from Nortel
builds on this leadership position. Nortel's VoIP systems have been
designed to easily transition to IMS, with all Nortel call servers
providing IP Multimedia and SIP Call Session Control. Nortel is
currently engaged in IMS trials with leading operators in each of the
key telecom domains being wireline, cable, CDMA and GSM/UMTS,
including an evaluation in Verizon's lab in Waltham, Mass., to
demonstrate Nortel's IMS multi-vendor interoperability and full
support for voice services over fiber to the premise (FTTP).

With the agreement to acquire Tasman Networks, which delivers
high- performance, wide-area network IP routers, Nortel strengthened
its enterprise infrastructure solutions. The Tasman products will
enhance Nortel's ability to provide seamless, feature-rich networks
that support critical real-time applications including voice, video,
and streaming multimedia applications to small to medium-sized branch
office deployments.

Continuing to focus on delivering faster and more efficient
wireless capabilities, Nortel's demonstrated several High Speed
Downlink Packet Access (HSDPA)/High Speed Uplink Packet Access
(HSUPA) milestones including the successful completion of HSDPA calls
and reaching 3.6Mbps data rates over the air interface with Qualcomm,
completion of the industry's first successful demonstration of live
HSDPA data card calls with Option N.V., successful completion of UMTS
and HSDPA calls in the 900 MHz band with Qualcomm and Orange, and
demonstration of the industry's first simultaneous HSUPA and HSDPA
calls over commercially available equipment at 3GSM World Congress in
Barcelona.

New Strategic Relationships

Creating a powerful new player in the high growth ultra broadband
access market Nortel and Huawei Technologies Co., Ltd. have entered
into a Memorandum of Understanding with the intent to establish a
joint venture focused on product enhancements for Huawei's current
broadband access portfolio and the development of a new ultra
broadband product portfolio. The two companies have also entered into
a supply agreement that allows Nortel to immediately begin engaging
customers with Huawei's current industry-leading broadband access
portfolio supporting Nortel's focus on seizing opportunities that
will generate new revenue and expand operating margin.

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.

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. 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
the announcement today of the restatement and Nortel's two previous
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 restatement exercise related to its two
previous 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 restatement
announced in this press release and two previous restatements of its
financial statements and related events and that the previously filed
financial statements of Nortel and NNL and related audit reports
should not be relied upon; the negative impact on Nortel and NNL of
their announced restatement and delay in filing their financial
statements and related periodic reports causing them to breach their
public debt indentures and obligations under their credit facilities
with the possibility that the holders of their public debt or NNL's
lenders would seek to accelerate the maturity of that debt; and
causing a breach of NNL's support facility with EDC with the
possibility that EDC would refuse to issue additional support under
the facility, terminate its commitments under the facility or require
NNL to cash collateralize all existing support; 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 U.S. and Canada; any
significant pending civil litigation actions not encompassed by
Nortel's proposed class action settlement; any substantial cash
payment and/or significant dilution of Nortel's existing equity
positions resulting from the finalization and approval of its
proposed class action settlement, or if such proposed class action
settlement is not finalized, 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 restatement of its financial statements announced in this
press release; 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; any
default in Nortel's filing obligations extending beyond two months
from the date hereof (May 9, 2006) causing any Canadian securities
regulatory authority to impose an order to cease all trading in
Nortel's securities within the applicable jurisdiction or to impose
such an order sooner if Nortel fails to comply with the alternate
information guidelines of such regulatory authorities; (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 its 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; restrictions on how Nortel and its
president and chief executive officer conduct its business arising
from a settlement with Motorola Inc.; 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 affect 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 restatement announced in this press
release and two previous restatements of its financial statements;
any acceleration under their public debt indentures and credit
facilities, which may result in Nortel and NNL being unable to meet
their respective payment obligations; 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 affect 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 Nortel's market price of its
publicly traded securities, or any future share consolidation
resulting in a lower total market capitalization or adverse affect on
the liquidity of Nortel's common shares. For additional information
with respect to certain of these and other factors, see the most
recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q
filed by Nortel 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)Nortel, the Nortel logo and the Globemark are trademarks of Nortel.
Nortel will host a teleconference/audio webcast to discuss this release.

TIME: 8:00 AM - 9:00 AM ET on Friday, March 10, 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/teleconference
International: 1-212-231-6007
Replay:
(Available one hour after the conference call until 5:00 p.m. ET,
April 6, 2006)
North America: 1-800-383-0935 Passcode: 21285361 followed by the
number sign
International: 1-402-530-5545 Passcode: 21285361 followed by the
number sign
Webcast: http://www.nortel.com/teleconference

NORTEL NETWORKS CORPORATION
Consolidated Statements of Operations
(Preliminary and Unaudited)
(Millions of U.S. dollars, except per share amounts)
Three months
ended Three months ended
December 31, December 31,
------------- ---------------------------------------
2005(a) 2004 2004
------------- ---------------------------------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues $ 2,947 $ 2,615 $ (30) $ 2,585
Cost of revenues 1,672 1,431 (16) 1,415
------------- ---------------------------------------
Gross profit 1,275 1,184 (14) 1,170
Selling, general and
administrative expense 674 542 (14) 528
Research and
development expense 450 494 (3) 491
Amortization of
intangibles 6 3 - 3
Special charges 28 81 (5) 76
(Gain) loss on sale
of businesses and
assets 11 16 (4) 12
Shareholder litigation
settlement expense 2,474 - - -
------------- ---------------------------------------
Operating earnings
(loss) (2,368) 48 12 60
Other income - net 112 119 (38) 81
Interest expense
Long-term debt (48) (61) - (61)
Other (4) 8 - 8
------------- ---------------------------------------
Earnings (loss) from
continuing operations
before income taxes,
minority interests
and equity in net
earnings (loss) of
associated companies (2,308) 114 (26) 88
Income tax benefit
(expense) 101 (3) - (3)
------------- ---------------------------------------
(2,207) 111 (26) 85
Minority interests
- net of tax (2) (17) - (17)
Equity in net earnings
(loss) of associated
companies
- net of tax 1 2 - 2
------------- ---------------------------------------
Net earnings (loss)
from continuing
operations (2,208) 96 (26) 70
Net earnings from
discontinued
operations
- net of tax 0.00 37 0.00 37
------------- ---------------------------------------
Net earnings (loss) (2,208) 133 (26) 107
------------- ---------------------------------------
------------- ---------------------------------------
Basic earnings
(loss) per common
share
- from continuing
operations $ (0.51) $ 0.02 $ (0.01) $ 0.01
- from discontinued
operations 0.00 0.01 0.00 0.01
------------- ---------------------------------------
Basic earnings (loss)
per common share $ (0.51) $ 0.03 $ (0.01) $ 0.02
------------- ---------------------------------------
------------- ---------------------------------------
Diluted earnings
(loss) per common share
- from continuing
operations $ (0.51) $ 0.02 $ (0.01) $ 0.01
- from discontinued
operations 0.00 0.01 0.00 0.01
------------- ---------------------------------------
Diluted earnings
(loss) per common
share $ (0.51) $ 0.03 $ (0.01) $ 0.02
------------- ---------------------------------------
------------- ---------------------------------------
(a) These results are preliminary and unaudited and reflect known
restatement adjustments. These results are subject to change as a
result of any adjustments arising from the restatement process,
subsequent events and the completion of the audit of the financial
statements by Nortel's independent auditors.

NORTEL NETWORKS CORPORATION
Consolidated Statements of Operations
(Preliminary and Unaudited)
(Millions of U.S. dollars, except per share amounts)
Twelve months
ended Twelve months ended
December 31, December 31,
------------- ---------------------------------------
2005(a) 2004 2004
------------- ---------------------------------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues $ 10,829 $ 9,828 $ (77) $ 9,751
Cost of revenues 6,370 5,750 (17) 5,733
------------- ---------------------------------------
Gross profit 4,459 4,078 (60) 4,018
Selling, general and
administrative
expense 2,403 2,138 (11) 2,127
Research and development
expense 1,852 1,959 (2) 1,957
Amortization of
intangibles 16 10 - 10
Special charges 173 180 (2) 178
(Gain) loss on sale
of businesses and
assets 46 (98) (3) (101)
Shareholder litigation
settlement expense 2,474 - - -
------------- ---------------------------------------
Operating earnings
(loss) (2,505) (111) (42) (153)
Other income - net 298 231 (51) 180
Interest expense
Long-term debt (204) (193) - (193)
Other (10) (10) - (10)
------------- ---------------------------------------
Earnings (loss) from
continuing operations
before income taxes,
minority interests and
equity in net earnings
(loss) of associated
companies (2,421) (83) (93) (176)
Income tax benefit
(expense) 52 29 - 29
------------- ---------------------------------------
(2,369) (54) (93) (147)
Minority interests
- net of tax (48) (46) - (46)
Equity in net earnings
(loss) of associated
companies - net of tax 4 - - -
------------- ---------------------------------------
Net earnings (loss)
from continuing
operations (2,413) (100) (93) (193)
Net earnings from
discontinued
operations
- net of tax 1 49 - 49
------------- ---------------------------------------
Net earnings (loss) (2,412) (51) (93) (144)
------------- ---------------------------------------
------------- ---------------------------------------
Basic earnings (loss)
per common share
- from continuing
operations $ (0.56) $ (0.02) $ (0.02) $ (0.04)
- from discontinued
operations 0.00 0.01 0.00 0.01
------------- ---------------------------------------
Basic earnings (loss)
per common share $ (0.56) $ (0.01) $ (0.02) $ (0.03)
------------- ---------------------------------------
------------- ---------------------------------------
Diluted earnings
(loss) per common
share
- from continuing
operations $ (0.56) $ (0.02) $ (0.02) $ (0.04)
- from discontinued
operations 0.00 0.01 0.00 0.01
------------- ---------------------------------------
Diluted earnings
(loss) per common
share $ (0.56) $ (0.01) $ (0.02) $ (0.03)
------------- ---------------------------------------
------------- ---------------------------------------
Cash and cash
equivalents $ 2,952 $ 3,686 $ - $ 3,686
------------- ---------------------------------------
------------- ---------------------------------------
(a) These results are preliminary and unaudited and reflect known
restatement adjustments. These results are subject to change as a
result of any adjustments arising from the restatement process,
subsequent events and the completion of the audit of the financial
statements by Nortel's independent auditors.

Segment revenues

The following table summarizes an estimated allocation of our
revenues for the three months ended December 31, 2005 and 2004, by
segment:

Three months
ended Three months ended
December 31, December 31,
------------- -----------------------------------------
2005(a) 2004 2004
------------- ------------- ------------- -------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues
Carrier Packet
Networks $ 802 $ 685 $ (2) $ 683
CDMA Networks 741 616 (15) 601
GSM and UMTS Networks 755 665 8 673
Enterprise Networks 651 651 (21) 630
------------- ------------- ------------- -------------
Total reportable
segments 2,949 2,617 (30) 2,587
Other (2) (2) - (2)
------------- ------------- ------------- -------------
Total revenues $ 2,947 $ 2,615 $ (30) $ 2,585
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(a) These results are based on estimated allocations of revenue and are
preliminary and unaudited and reflect known restatement adjustments.
These results are subject to change as a result of any adjustments
arising from the restatement process, subsequent events and the
completion of the audit of the financial statements by Nortel's
independent auditors.

The following table summarizes an estimated allocation of our
revenues for the twelve months ended December 31, 2005 and 2004, by
segment:

Twelve months
ended Twelve months ended
December 31, December 31,
------------- -----------------------------------------
2005(a) 2004 2004
------------- -----------------------------------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues
Carrier Packet
Networks $ 2,920 $ 2,625 $ (1) $ 2,624
CDMA Networks 2,418 2,263 (2) 2,261
GSM and UMTS Networks 2,888 2,575 (19) 2,556
Enterprise Networks 2,599 2,354 (55) 2,299
------------- ------------- ------------- -------------
Total reportable
segments 10,825 9,817 (77) 9,740
Other 4 11 - 11
------------- ------------- ------------- -------------
Total revenues $ 10,829 $ 9,828 $ (77) $ 9,751
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(a) These results are based on estimated allocations of revenue and are
preliminary and unaudited and reflect known restatement adjustments.
These results are subject to change as a result of any adjustments
arising from the restatement process, subsequent events and the
completion of the audit of the financial statements by Nortel's
independent auditors.

Geographic revenues

The following table summarizes our geographic revenues for the
three months ended December 31, 2005 and 2004, based on the location
of the customer:

Three months
ended Three months ended
December 31, December 31,
------------- -----------------------------------------
2005(a) 2004 2004
------------- ------------- ------------- -------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues
United States $ 1,410 $ 1,180 $ (41) $ 1,139
EMEA(b) 779 760 27 787
Canada 145 155 (9) 146
Asia Pacific 368 349 7 356
CALA(c) 245 171 (14) 157
------------- ------------- ------------- -------------
Consolidated $ 2,947 $ 2,615 $ (30) $ 2,585
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(a) These results are preliminary and unaudited and reflect known
restatement adjustments. These results are subject to change as a
result of any adjustments arising from the restatement process,
subsequent events and the completion of the audit of the financial
statements by Nortel's independent auditors.
(b) The Europe, Middle East and Africa region, or EMEA.
(c) The Caribbean and Latin America region, or CALA.

The following table summarizes our geographic revenues for the
twelve months ended December 31, 2005 and 2004, based on the location
of the customer:

Twelve months
ended Twelve months ended
December 31, December 31,
------------- -----------------------------------------
2005(a) 2004 2004
------------- ------------- ------------- -------------
(Anticipated
(As restatement (Preliminary
previously adjust- anticipated
reported) ments)(a) restated)(a)
Revenues
United States $ 5,216 $ 4,833 $ (41) $ 4,792
EMEA 2,768 2,580 9 2,589
Canada 642 568 (39) 529
Asia Pacific 1,505 1,253 28 1,281
CALA 698 594 (34) 560
------------- ------------- ------------- -------------
Consolidated $ 10,829 $ 9,828 $ (77) $ 9,751
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
(a) These results are preliminary and unaudited and reflect known
restatement adjustments. These results are subject to change as a
result of any adjustments arising from the restatement process,
subsequent events and the completion of the audit of the financial
statements by Nortel's independent auditors.

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

Contact:
For further information: Media, Patricia Vernon, +1-905-863-1035,
patricve@nortel.com; Investors, +1-888-901-7286, +1-905-863-6049,
investor@nortel.com