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Nortel Networks

Nortel Provides Clarification On Restatement Review

Toronto (ots/PRNewswire)

Nortel(x) Networks Corporation (NYSE/TSX: NT) issued a
clarification of certain matters reported in the press relating to
its announcement on March 10, 2006 concerning the need to restate
certain prior period financial results. The Company wishes to clarify
that Nortel's internal and external auditors have not undertaken an
investigation as to whether any improper conduct may be associated
with the need to effect the latest restatement.
The internal and external reviews referenced in the press related
to an extensive contract review that was undertaken as part of
remedial efforts relating to internal control deficiencies. As
previously announced, the review 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 and other discussions with Nortel's
independent auditors 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. While the
Company has not become aware of any wrongdoing as a result of this
extensive contract review, and none was apparent, this review was not
focused on conduct matters. The Company will continue to examine this
aspect.
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 http://www.nortel.com. For the latest Nortel news, visit
http://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.
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.
Web site: http://www.nortel.com
              http://www.nortel.com/news

Contact:

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

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