Nortel Networks

Nortel Files and Reports Results for the First Quarter 2006

    Toronto, Canada (ots/PRNewswire) -

@@start.t1@@      Financial Reporting is Now Current
      Nortel Provides Status Update
      - Q1 2006 revenues of US$2.38 billion, essentially flat year over year
      - Q1 2006 net loss of US$167 million, (US$0.04) per common share on a
         diluted basis
      - Q1 2006 cash balance of US$2.70 billion@@end@@

TORONTO, Canada, June 6 /PRNewswire/ --

    Nortel Networks(x) Corporation (NYSE:NT; TSX: NT) today announced that it  and its principal operating subsidiary Nortel Networks Limited (NNL) have  filed their unaudited financial statements for the first quarter of 2006  prepared in accordance with accounting principles generally accepted in the  United States and related Quarterly Reports on Form 10-Q and corresponding  Canadian filings. All dollar amounts included are in U.S. dollars.

TORONTO, Canada, June 6 /PRNewswire/ --

    First Quarter 2006 Results

TORONTO, Canada, June 6 /PRNewswire/ --

    Revenues were US$2.38 billion for the first quarter of 2006 compared to  US$2.39 billion for the first quarter of 2005 and US$3.0 billion for the  fourth quarter of 2005. The Company reported a net loss in the first  quarter of 2006 of US$167 million, or (US$0.04) per common share on a  diluted basis, compared to a net loss of US$104 million, or (US$0.02) per  common share on a diluted basis, in the first quarter of 2005 and a net  loss of US$2,302 million, or (US$0.53) per common share on a diluted basis,  in the fourth quarter of 2005.

    Net loss in the first quarter of 2006 included an income tax expense of  approximately US$23 million, a shareholder litigation expense of US$19  million reflecting a mark-to-market adjustment of the share portion of the  proposed class action settlement and a benefit of US$35 million in gains on  the sale of businesses and assets. Net loss in the first quarter of 2005  included special charges of US$14 million related to restructuring  activities. Net loss in the fourth quarter of 2005 included a litigation  expense of US$2,474 million for the proposed class action settlement, a tax benefit of approximately US$140 million related to a liability release as a  result of new information regarding transfer pricing issues, special  charges of US$25 million related to restructuring activities and US$11  million of costs related to the sale of businesses and assets.

    "I am pleased to be current in our financial reporting," said Mike Zafirovski, president and chief executive officer, Nortel. "While our results reflect a challenging first quarter, we continue to expect good  revenue and operating margin momentum commencing in the second quarter, in  line with our previously communicated full year plan. We remain focused on  our business transformation initiatives, integrity renewal and short term  growth opportunities, while concurrently building the long-term foundation  for the new Nortel."

TORONTO, Canada, June 6 /PRNewswire/ --

    Breakdown of First Quarter 2006 Revenues

TORONTO, Canada, June 6 /PRNewswire/ --

    Mobility and Converged Core Networks revenues were US$1.43 billion, a  decrease of 4 percent compared with the year-ago quarter and a decrease of  23 percent sequentially. Enterprise Solutions and Packet Networks revenues  were US$871 million, a decrease of 1 percent compared with the year-ago  quarter and a decrease of 15 percent sequentially. Revenues in both  segments were impacted by the timing of certain contracts as both deferred  revenues and backlog increased at quarter end by US$140 million and US$275  million, respectively.

TORONTO, Canada, June 6 /PRNewswire/ --

    Gross margin

TORONTO, Canada, June 6 /PRNewswire/ --

    Gross margin was 38 percent of revenue in the first quarter of 2006,  primarily impacted by product mix, including the timing of certain  contracts, and competitive pricing pressures, partially offset by  improvements in our cost structure.

TORONTO, Canada, June 6 /PRNewswire/ --

    Selling, general and administrative (SG&A)

TORONTO, Canada, June 6 /PRNewswire/ --

    SG&A expenses were US$595 million in the first quarter of 2006, which  included a cost of US$43 million in relation to internal control  remediation activities and investment in our finance organization. This  compares to SG&A expenses of US$578 million for the first quarter of 2005,  which included costs of US$60 million in relation to restatement activities  and investment in the Company's finance organization and US$680 million for  the fourth quarter of 2005, which included costs of approximately US$38  million related to executive recruitment and retirement and costs of US$50  million in relation to internal control remedial measures, investment in  the Company's finance processes and our prior restatement related activities.

TORONTO, Canada, June 6 /PRNewswire/ --

    Research and development (R&D)

TORONTO, Canada, June 6 /PRNewswire/ --

    R&D expenses were US$478 million in the first quarter of 2006, reflecting increased investment in targeted product areas and unfavorable  foreign exchange. This compares to US$474 million for the first quarter of  2005 and US$451 million for the fourth quarter of 2005.

TORONTO, Canada, June 6 /PRNewswire/ --

    Other income (expense) - net

TORONTO, Canada, June 6 /PRNewswire/ --

    Other income (expense) - net was net income of US$69 million for the  first quarter of 2006, which primarily related to investment income of  approximately US$29 million and a gain of US$26 million related to the sale  of a note receivable from Bookham, Inc.

TORONTO, Canada, June 6 /PRNewswire/ --

    Cash

TORONTO, Canada, June 6 /PRNewswire/ --

    Cash balance at the end of the first quarter of 2006 was US$2.70 billion, down from US$2.95 billion at the end of 2005. This decrease in  cash from the end of 2005 was primarily driven by a cash outflow from  operations of US$174 million, which included US$91 million for pension  funding and US$35 million for restructuring, and payments of US$99 million  for plant and equipment, and net payments of US$98 million related to the  acquisition of Tasman, partially offset by cash proceeds of US$87 million  related to the sale of the Brampton facility. On June 1, 2006, US$575  million related to the proposed class action settlement, plus approximately  US$5 million in interest (accrued since March 23, 2006), was placed in  escrow pending satisfactory completion of all conditions to the settlement.

TORONTO, Canada, June 6 /PRNewswire/ --

    Outlook (a)

TORONTO, Canada, June 6 /PRNewswire/ --

    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 second quarter of 2006, we expect revenue, gross  margin and operating expenses to support our full year guidance."

TORONTO, Canada, June 6 /PRNewswire/ --

    (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.

TORONTO, Canada, June 6 /PRNewswire/ --

    Other items

TORONTO, Canada, June 6 /PRNewswire/ --

    Financial Reporting Obligations; Stock Exchanges; Debt Securities; Credit and Support Facilities

TORONTO, Canada, June 6 /PRNewswire/ --

    With the filing by the Company and NNL of their Quarterly Reports on  Form 10-Q for the first quarter of 2006 and corresponding Canadian filings,  the Company and NNL are now current with their financial reporting  obligations. With the delivery of the filings to the New York and Toronto  stock exchanges, and their subsequent delivery to shareholders, the Company  and NNL will be in compliance with stock exchange listing requirements and  their financial statement delivery obligations under applicable securities  laws.

    With the delivery of these filings to the indenture trustees, the Company and NNL will also be in compliance with their obligations under  their public debt indentures. As previously announced, the Company and NNL  have obtained waivers under Nortel's USUS$1.3 billion one-year credit  facility and NNL has obtained a waiver from Export Development Canada (EDC)  of all remaining defaults and breaches under the EDC performance-based  support facility. With the delivery of the first quarter of 2006 filings,  the Company and NNL are in compliance with their obligations under the  credit and support facilities.

TORONTO, Canada, June 6 /PRNewswire/ --

    OSC Bi-Weekly Updates; Management Cease Trade Orders

TORONTO, Canada, June 6 /PRNewswire/ --

    Today's announcements serve as a status update by the Company and NNL  pursuant to the alternate information guidelines of the Ontario Securities  Commission (OSC). The Company and NNL reported that there have been no  material developments from prior status updates, with the exception of the  matters described herein. As previously announced, the OSC issued an order  prohibiting certain directors and officers and certain current and former  employees of the Company and NNL from trading in securities of the Company  and NNL. Two other Canadian securities commissions issued similar orders.  Now that the Company and NNL are current in their financial reporting  obligations for the first quarter of 2006, the Company and NNL will be  applying to have the management cease trade orders revoked and will cease reporting under the OSC's alternate information guidelines.

TORONTO, Canada, June 6 /PRNewswire/ --

    Recent Business Highlights

TORONTO, Canada, June 6 /PRNewswire/ --

    Revenue Momentum

TORONTO, Canada, June 6 /PRNewswire/ --

    Recent momentum in Nortel's mobility portfolio includes the deployment  of one of the world's first commercial high-speed mobile networks for  Partner Communications Company Ltd in Israel based on HSDPA technology. In  addition to Partner, Nortel has worked with a number of wireless operators  on HSDPA trials and deployments including Vodafone Spain in Barcelona, EDGE  Wireless in the US, SKT and KTF in Korea, SOFTBANK Group's BB Mobile in  Japan, Orange France and Mobilkom Austria.  With the signing of an  agreement with China's Ministry of Railways for GSM-Railway switching  centres along passenger lines spanning 20 of China's 31 provinces, Nortel  added to its established leadership GSM-R position, which includes national deployments for the three largest railway operations in Europe - RFF in  France, Network Rail in Great Britain and Deutsche Bahn in Germany.

    Nortel continues its lead in the Metro WDM market for the 7th consecutive year with 26.2% Q1 2006 marketshare (Dell 'Oro Group) to enable  Ethernet connectivity options and industry leading storage extension  capabilities in support of Carrier Managed Services. BMW through Charter  Communications, the Australian Stock Exchange, and the Agricultural Bank of  China have all recently leveraged Nortel's strength in securing their business.

    Nortel's optical momentum with cable operators continues to build with  the announcement of customer wins with Charter Communications, the fourth  largest MSO in the US, and Unity Media, which has Europe's largest cable  network. These customers were recently added to the fold of Nortel MSO  customers that include Comcast, Time Warner, and Cox Communications - the  top three US Cable Operators.

    Nortel's enterprise customer momentum includes customers such as; Station Casinos Inc., one of the leading gaming corporations in the U.S.,  privately owned airline Jazeera Airways, Lebanon based consumer product  manufacturing group Industry Development Company (INDEVCO), and one of  China's top four banks the Agriculture Bank of China choosing Nortel's  converged IP solutions.

TORONTO, Canada, June 6 /PRNewswire/ --

    Leading Next-Generation Solutions

TORONTO, Canada, June 6 /PRNewswire/ --

    The world's first handset based HSDPA Network has been launched by SK  Telecom, South Korea's largest mobile operator using LG-Nortel wireless  broadband technology. This network is the first to provide HSDPA  performance on handsets as well as data cards to enable high-speed  broadband wireless services to subscribers using either a handset or a  laptop computer. Nortel's HSDPA technology is a key component in supporting  SK Telecom's "3G+" new service offerings such as "high quality video call"  and "ultra speed data transfer".

    Supporting our belief in the market potential of wireless broadband  including WiMAX and Wireless Mesh, leading Russia-based service provider  Golden Telecom is using wireless mesh network technology from Nortel to  build Moscow's first wireless mesh network which will expand Golden  Telecom's broadband communication services to include universal indoor and  outdoor wireless access to approximately 3.9 million households in Moscow.  National Taiwan University Electrical Engineering and Graduate Institute of  Business Administration departments are collaborating with Nortel in a  WiMAX broadband service trial that includes a wide range of high-bandwidth multimedia applications.

TORONTO, Canada, June 6 /PRNewswire/ --

    About Nortel

TORONTO, Canada, June 6 /PRNewswire/ --

    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.

TORONTO, Canada, June 6 /PRNewswire/ --

    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 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 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.

TORONTO, Canada, June 6 /PRNewswire/ --

    (x) Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

TORONTO, Canada, June 6 /PRNewswire/ --

    Nortel will host a teleconference/audio webcast to discuss First Quarter 2006 Results.

TORONTO, Canada, June 6 /PRNewswire/ --

    TIME: 8:30 AM - 9:30 AM EDT on Tuesday, June 6, 2006

TORONTO, Canada, June 6 /PRNewswire/ --

    To participate, please call the following at least 15 minutes prior to  the start of the event.

@@start.t2@@      Teleconference:                              Webcast:
      North America: 1-888-211-4395        http://www.nortel.com/q1earnings2006
      International: +1-212-231-6007
      Replay:
      (Available one hour after the conference call)
      North America: 1-800-383-0935        Passcode: 21293763 followed by the
                                                            number sign
      International: +1-402-530-5545      Passcode: 21293763 followed by the
                                                            number sign
      Webcast: http://www.nortel.com/q1earnings2006
                                        NORTEL NETWORKS CORPORATION
                      Consolidated Statements of Operations (unaudited)
          (U.S. GAAP; Millions of U.S. dollars, except per share amounts)
                                                                                Three months ended
                                                              --------------------------------------
                                                                 March 31,  December 31,    March 31,
                                                                    2006              2005              2005
                                                              ------------ ------------ ------------
                                                                                                         As restated
      Revenues                                            US$  2,382    US$  2,997    US$  2,389
      Cost of revenues                                        1,474            1,815            1,377
                                                              ------------ ------------ ------------
      Gross profit                                                 908            1,182            1,012
      Selling, general and administrative
        expense                                                        595                680                578
      Research and development expense                 478                451                474
      Amortization of intangibles                            5                  6                  2
      Special charges                                                5                 25                 14
      (Gain) loss on sale of businesses
        and assets                                                  (35)                11                 22
      Shareholder litigation settlement
        expense                                                         19            2,474                  -
                                                              ------------ ------------ ------------
      Operating earnings (loss)                          (159)         (2,465)              (78)
      Other income - net                                         69                122                 54
      Interest expense
         Long-term debt                                          (46)              (52)              (50)
         Other                                                         (24)                (4)                (3)
                                                              ------------ ------------ ------------
      Earnings (loss) from continuing
        operations before income taxes,
        minority interests and equity in
        net earnings (loss) of associated
        companies                                                  (160)         (2,399)              (77)
      Income tax benefit (expense)                        (23)              102                (16)
                                                              ------------ ------------ ------------
                                                                         (183)         (2,297)              (93)
      Minority interests - net of tax                      9                 (4)              (14)
      Equity in net earnings (loss) of
        associated companies - net of tax                (2)                 1                  1
                                                              ------------ ------------ ------------
      Net earnings (loss) from continuing
        operations                                                 (176)         (2,300)            (106)
      Net earnings from discontinued
        operations - net of tax                                 -                 (2)                 2
                                                              ------------ ------------ ------------
      Net earnings (loss) before cumulative
        effect of accounting change                      (176)         (2,302)            (104)
      Cumulative effect of accounting
        change - net of tax                                        9                  -                  -
                                                              ------------ ------------ ------------
      Net earnings (loss)                          US$    (167)  US$ (2,302)  US$    (104)
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
      Average shares outstanding (millions)
        - Basic                                                    4,339            4,338            4,338
      Average shares outstanding (millions)
        - Diluted                                                 4,339            4,338            4,338
      Basic and diluted earnings (loss)
        per common share
         - from continuing operations         US$  (0.04)  US$  (0.53)  US$  (0.02)
         - from discontinued operations                0.00              0.00              0.00
                                                              ------------ ------------ ------------
      Basic earnings (loss) per common
        share                                                US$  (0.04)  US$  (0.53)  US$  (0.02)
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
                                        NORTEL NETWORKS CORPORATION
                              Consolidated Balance Sheets (unaudited)
          (U.S. GAAP; Millions of U.S. dollars, except for share amounts)
                                                              --------------------------------------
                                                                 March 31,  December 31,    March 31,
                                                                    2006              2005              2005
                                                              ------------ ------------ ------------
                                                                                                         As restated
                                            ASSETS
      Current assets
      Cash and cash equivalents                 US$  2,695    US$  2,951    US$  3,430
      Restricted cash and cash
        equivalents                                                  77                 77                 81
      Accounts receivable - net                         2,620            2,862            2,624
      Inventories - net                                      1,984            1,804            1,974
      Deferred income taxes - net                         388                377                248
      Other current assets                                    823                796                428
                                                              ------------ ------------ ------------
      Total current assets                                 8,587            8,867            8,785
      Investments                                                  246                244                287
      Plant and equipment - net                         1,531            1,564            1,586
      Goodwill                                                    2,680            2,592            2,260
      Intangible assets - net                                166                172                 75
      Deferred income taxes - net                      3,606            3,629            3,707
      Other assets                                              1,025            1,044                758
                                                              ------------ ------------ ------------
      Total assets                                      US$ 17,841    US$ 18,112    US$ 17,458
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
                                 LIABILITIES AND
                              SHAREHOLDERS' EQUITY
      Current liabilities
      Trade and other accounts payable      US$  1,069    US$  1,180        US$  974
      Payroll and benefit-related
        liabilities                                                 778                801                460
      Contractual liabilities                                297                346                518
      Restructuring liabilities                              84                 95                144
      Other accrued liabilities                         4,384            4,200            3,593
      Long-term debt due within one year              168            1,446            1,289
      Loan payable                                              1,300                  -                  -
                                                              ------------ ------------ ------------
      Total current liabilities                         8,080            8,068            6,978
      Long-term debt                                          2,445            2,439            2,566
      Deferred income taxes - net                         109                104                144
      Other liabilities                                      5,778            5,935            3,670
                                                              ------------ ------------ ------------
      Total liabilities                                    16,412          16,546          13,358
                                                              ------------ ------------ ------------
      Minority interests in subsidiary
        companies                                                    754                780                626
                              SHAREHOLDERS' EQUITY
      Common shares, without par value -
        Authorized shares: unlimited;
         Issued and outstanding shares:
          4,339,337,625 as of March 31,
          2006 and 4,339,162,932 as of
          December 31, 2005                                33,935          33,932          33,840
      Additional paid-in capital                        3,295            3,281            3,301
      Accumulated deficit                                (35,692)        (35,525)        (33,054)
      Accumulated other comprehensive
        loss                                                          (863)            (902)            (613)
                                                              ------------ ------------ ------------
      Total shareholders' equity                          675                786            3,474
                                                              ------------ ------------ ------------
      Total liabilities and
        shareholders' equity                        US$ 17,841    US$ 18,112    US$ 17,458
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
                                        NORTEL NETWORKS CORPORATION
                      Consolidated Statements of Cash Flows (unaudited)
                                (U.S. GAAP; Millions of U.S. dollars)
                                                                              Three months ended
                                                              --------------------------------------
                                                                 March 31,  December 31,    March 31,
                                                                    2006              2005              2005
                                                              ------------ ------------ ------------
                                                                                                         As restated
      Cash flows from (used in) operating
        activities
         Net earnings (loss) from
          continuing operations                  US$    (176)  US$ (2,300)  US$    (106)
         Adjustments to reconcile net
          earnings (loss) from continuing
          operations to net cash from
          (used in) operating activities,
          net of effects from acquisitions
          and divestitures of businesses:
            Amortization and depreciation                 60                 69                 81
            Non-cash portion of shareholder
              litigation settlement                            19            1,899                  -
            Non-cash portion of special
              charges and related asset
              write downs                                              -                 24                  -
            Equity in net (earnings) loss
              of associated companies                          2                 (1)                (1)
            Stock option compensation                        25                 30                 18
            Deferred income taxes                              16              (135)                 8
            Other liabilities                                    73                 38                 79
            (Gain) loss on sale or write
              down of investments,
              businesses and assets                          (34)              (40)                27
            Other - net                                            103                113              (107)
            Change in operating assets and
              liabilities                                         (262)              420              (262)
                                                              ------------ ------------ ------------
         Net cash from (used in)
          operating activities of
          continuing operations                            (174)              117              (263)
                                                              ------------ ------------ ------------
      Cash flows from (used in) investing
        activities
         Expenditures for plant and
          equipment                                                 (99)              (82)              (54)
         Proceeds on disposals of plant
          and equipment                                            87                  -                  -
         Restricted cash and cash
          equivalents                                                 3                 (5)                 1
         Acquisitions of investments
          and businesses - net of cash
          acquired                                                 (121)            (202)                (2)
         Proceeds on sale of investments
          and businesses                                          30                162                 83
                                                              ------------ ------------ ------------
         Net cash from (used in)
          investing activities of
          continuing operations                            (100)            (127)                28
                                                              ------------ ------------ ------------
      Cash flows from (used in) financing
        activities
         Dividends paid by subsidiaries
          to minority interests                              (18)              (10)              (14)
         Increase in notes payable                            4                 11                 20
         Decrease in notes payable                          (3)              (19)              (26)
         Borrowings in loan payable                    1,300                  -                  -
         Repayments of long-term debt                (1,275)                 -                  -
         Decrease in capital leases payable            (5)                (2)                (1)
         Issuance of common shares                            1                  2                  -
                                                              ------------ ------------ ------------
         Net cash from (used in)
          financing activities of
          continuing operations                                 4                (18)              (21)
                                                              ------------ ------------ ------------
      Effect of foreign exchange rate
        changes on cash and cash
        equivalents                                                  14                (16)              (35)
                                                              ------------ ------------ ------------
      Net cash from (used in) continuing
        operations                                                 (256)              (44)            (291)
      Net cash from (used in)
        operating activities of
        discontinued operations                                 -                 (1)                36
                                                              ------------ ------------ ------------
      Net increase (decrease) in cash
        and cash equivalents                                 (256)              (45)            (255)
      Cash and cash equivalents at
        beginning of period                                 2,951            2,996            3,685
                                                              ------------ ------------ ------------
      Cash and cash equivalents at
        end of period                                  US$  2,695    US$  2,951    US$  3,430
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
                                        NORTEL NETWORKS CORPORATION
                        Consolidated Financial Information (unaudited)
                                (U.S. GAAP; Millions of U.S. dollars)
      Segmented revenues
      The following table summarizes our revenue by segment for:
                                                                              Three months ended
                                                              --------------------------------------
                                                                 March 31,  December 31,    March 31,
                                                                    2006              2005              2005
                                                              ------------ ------------ ------------
                                                                                                         As restated
      Revenues
      Mobility and Converged Core
        Networks                                          US$  1,426    US$  1,862    US$  1,486
      Enterprise Solutions and Packet
        Networks                                                      871            1,028                878
                                                              ------------ ------------ ------------
      Total reportable segments                         2,297            2,890            2,364
      Other                                                              85                107                 25
                                                              ------------ ------------ ------------
      Total revenues                                  US$  2,382    US$  2,997    US$  2,389
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
      Geographic revenues
      The following table summarizes our geographic revenues based on the
      location of the customer for:
                                                                              Three months ended
                                                              --------------------------------------
                                                                 March 31,  December 31,    March 31,
                                                                    2006              2005              2005
                                                              ------------ ------------ ------------
                                                                                                        As restated
      Revenues
      United States                                    US$  1,132    US$  1,363    US$  1,219
      EMEA(a)                                                         631                768                673
      Canada                                                          159                138                112
      Asia Pacific                                                 301                542                264
      CALA(b)                                                         159                186                121
                                                              ------------ ------------ ------------
      Total revenues                                  US$  2,382    US$  2,997    US$  2,389
                                                              ------------ ------------ ------------
                                                              ------------ ------------ ------------
      (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
                                                              -------------------------
                                                                 March 31,      March 31,
                                                                    2006              2005
                                                              ------------ ------------
                                                                                    As restated
      Revenues
      Mobility and Converged Core
        Networks
         CDMA solutions                                          514                534
         GSM and UMTS solutions                              633                713
         Circuit and packet voice
          solutions                                                 279                239
                                                              ------------ ------------
                                                                        1,426            1,486
      Enterprise Solutions and Packet
        Networks
         Circuit and packet voice
          solutions                                                 339                322
         Optical networking solutions                    250                237
         Data networking and security
          solutions(a)                                            282                319
                                                              ------------ ------------
                                                                          871                878
      Other                                                              85                 25
                                                              ------------ ------------
      Total revenues                                  US$  2,382    US$  2,389
                                                              ------------ ------------
                                                              ------------ ------------
      (a) Includes US$175 and US$203 of revenue from our enterprise customers
            for the three months ended March 31, 2006 and 2005, respectively.@@end@@

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

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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