Nortel Networks

Nortel Reports Results for the Third Quarter 2006

    Toronto, Canada, November 7 (ots/PRNewswire) -

    -  Q3 Revenues of US$2.96 Billion, up 17 Percent Year Over Year

    -  Q3 Net Loss of US$99 Million, US$0.02 per Common Share on a Diluted  basis

    -  Q3 Cash Balance of US$2.60 Billion

    -  Nortel Announces a Share Consolidation on a 1 for 10 Basis

    Nortel Networks(xx) Corporation (NYSE: NT; TSX: NT) today announced its unaudited financial results for the third quarter of 2006 prepared in accordance with accounting principles generally accepted in the United States. All dollar amounts included are in U.S. dollars.

    Third Quarter 2006 Results

    --------------------------

    Revenues were US$2.96 billion for the third quarter of 2006 compared to US$2.52 billion for the third quarter of 2005 and US$2.74 billion for the second quarter of 2006. The Company reported a net loss in the third quarter of 2006 of US$99 million, or US$0.02 per common share on a diluted basis, compared to a net loss of US$136 million, or US$0.03 per common share on a diluted basis, in the third quarter of 2005 and net earnings of US$366 million, or US$0.08 per common share on a diluted basis, in the second quarter of 2006.

    Net loss in the third quarter of 2006 included a benefit of approximately US$43 million related to the announced changes to the North American employee benefit plans, a gain of US$16 million on the sale of assets, a shareholder litigation expense of US$38 million reflecting a mark-to-market adjustment of the share portion of the global class action settlement and special charges of US$25 million for restructuring. The net loss in the third quarter of 2005 included special charges of US$39 million related to restructuring activities and a net charge of US$20 million related to the re-filing of the Company's tax returns as a result of the financial restatements. Net earnings in the second quarter of 2006 included a shareholder litigation recovery of US$510 million reflecting a mark-to-market adjustment of the share portion of the global class action settlement, special charges of US$45 million for restructuring and a loss of US$10 million on the sale of assets.

    "I am pleased with our overall revenue growth and, in particular, in our focus areas of next generation mobility, enterprise and related services, and metro optical. I am also pleased with the 270 basis points operating margin improvement versus the third quarter of 2005. However, we should and will be moving faster. Pricing pressures and the speed at which our revenues are shifting to next generation, early cycle products is increasing our challenge to drive profitability improvements," said Mike Zafirovski, president and chief executive officer, Nortel. "The management team and I are resolute in achieving a globally competitive cost structure and we are accelerating and enhancing our Business Transformation and Lean Six Sigma programs to close this gap and achieving double digit operating margins in 2008. I believe recent steps of establishing the Microsoft alliance, divesting our UMTS access business, and increasingly shifting resources to lower cost centers are indicative of our resolve."

    Breakdown of Third Quarter 2006 Revenues

    Commencing in the third quarter of 2006, the Company's reportable segments were aligned to reflect previously announced organizational changes. The new reportable segments are Mobility and Converged Core Networks (MCCN), Metro Ethernet Networks (MEN), Enterprise Solutions (ES) and Global Services (GS). For further details, see the attached financial tables.

    MCCN revenues were US$1,540 million, an increase of 23 percent compared with the year-ago quarter and an increase of 7 percent sequentially. ES revenues were US$609 million, an increase of 14 percent compared with the year-ago quarter and an increase of 28 percent sequentially. MEN revenues were US$430 million, an increase of 18 percent compared with the year-ago quarter and a decrease of 8 percent sequentially. GS revenues were US$316 million, an increase of 4 percent compared with the year-ago quarter and an increase of 2 percent sequentially. Deferred revenues decreased sequentially by US$136 million and by US$10 million since the beginning of the year. Order input for the quarter was US$2.35 billion, essentially flat from US$2.36 billion in the third quarter of 2005 and down significantly from the US$2.82 billion in the second quarter of 2006, primarily due to the higher than normal volume of CDMA orders received in second quarter. The US$2.82 billion of order input in the second quarter of 2006 includes a correction resulting in a reduction of US$123 million from the previously announced second quarter order input.

    Gross margin

    Gross margin was 38 percent of revenue in the third quarter of 2006. This compares to gross margin of 39 percent for the third quarter of 2005 and 39 percent for the second quarter of 2006. Compared to the third quarter of 2005, gross margin was impacted primarily by pricing pressures and product mix, which was partially offset by higher sales volumes and a project loss recorded in the third quarter of 2005 related to a wireless contract in India.

    Selling, general and administrative (SG&A)

    SG&A expenses were US$605 million in the third quarter of 2006, compared to US$567 million for the third quarter of 2005, and US$596 million for the second quarter of 2006. Compared to the third quarter of 2005, SG&A was impacted by the consolidation of the LG-Nortel joint venture and higher costs related to our business transformation initiatives, partially offset by lower restatement related and employee benefit plan costs.

    Research and development (R&D)

    R&D expenses were US$480 million in the third quarter of 2006, compared to US$443 million for the third quarter of 2005 and US$489 million for the second quarter of 2006. Compared to the third quarter of 2005, R&D was impacted by increased investment in targeted product areas, the impact of the consolidation of the LG-Nortel joint venture, partially offset by lower employee benefit plan costs.

    Special Charges

    Special charges in the third quarter of 2006 of US$25 million included US$17 million related to revisions to our prior restructuring plans and US$8 million for the restructuring program announced June 27, 2006. The acceleration of the business transformation programs to reduce operating costs and improve operating margins may result in additional restructuring costs, as the programs are launched.

    Other income (expense) - net

    Other income (expense) - net was net income of US$51 million for the third quarter of 2006, which primarily related to investment and other income of US$58 million, partially offset by US$11 million of litigation costs.

    Cash

    Cash balance at the end of the third quarter of 2006 was US$2.60 billion, up from US$1.90 billion at the end of the second quarter of 2006. This increase in cash was primarily driven by cash received upon the closing of the offering of US$2 billion aggregate principal amount of senior notes, less cash used of US$1.3 billion to repay the US$1.3 billion one-year credit facility that was entered into in February 2006, partially offset by a cash outflow from operations of US$46 million.

    Nine Month 2006 Results

    For the first nine months of 2006, revenues were US$8.08 billion compared to US$7.53 billion for the same period in 2005. The Company reported net earnings for the first nine months of 2006 of US$100 million, or US$0.02 per common share on a diluted basis, compared to a net loss of US$273 million, or (US$0.06) per common share on a diluted basis, for the same period in 2005.

    Net earnings in the first nine months of 2006 included a shareholder litigation recovery of US$453 million reflecting mark-to-market adjustments of the share portion of the global class action settlement, special charges of US$75 million related to restructuring activities, a benefit of approximately US$43 million related to the announced changes to the North American employee benefit plans and a benefit of US$41 million related to the sale of assets. The first nine months of 2005 results included special charges of US$145 million related to restructuring activities and US$36 million of costs related to the sale of businesses and assets.

    Outlook(a)

    -------

    Commenting on the Company's financial expectations, Peter Currie, executive vice president and chief financial officer, Nortel, said, "For the fourth quarter of 2006, we expect revenue growth in the mid to high single digits compared to the fourth quarter of 2005, gross margin to be between 38 and 39 as a percentage of revenue and spending to be approximately flat compared to the fourth quarter of 2005. Based on this fourth quarter outlook, we now expect mid to high single digit revenue growth for the full year 2006 compared to 2005, full year gross margin to be between 38 and 39 as a percentage of revenue, and we continue to expect operating expenses to be flat to up slightly from 2005."

    (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.

    Other

    -----

    Share Consolidation

    Nortel today also announced the planned consolidation of the Company's common shares as approved at the Company's annual and special meeting of shareholders held on June 29, 2006. The consolidation is expected to be effective on December 1, 2006 at a ratio of one consolidated share for every 10 pre-consolidation shares, as approved by the Company's board of directors. The consolidation is expected to increase investors' visibility into the Company's profitability on a per share basis, reduce share transaction fees for investors and certain administrative costs for Nortel, and broaden interest to institutional investors and investment funds.

    "True shareholder value will be driven by ongoing progress and Company performance, but this step helps create a better foundation on which to build," said Peter Currie, Nortel's executive vice president and chief financial officer.

    Registered shareholders of the Company will receive instructions by mail on how to obtain a new share certificate representing their consolidated common shares. This information is also available on the Company website, www.nortel.com.

    Upon implementation of the consolidation, the Company's 4.25 percent convertible senior notes due September 1, 2008 will be convertible by holders into common shares of Nortel Networks Corporation at a new conversion price of US$100 per common share.

    Recent Business Highlights

    --------------------------

    Revenue Momentum

    Nortel continues to secure contracts with some of the most respected companies around the world. Recently, the New York Times Company selected Nortel to build and maintain a state-of-the-art IP network for its new headquarters which will open in the Spring 2007. Nortel's enterprise IP solutions will be used to provide a range of personalized communications for guests at the new Westin Beijing Financial Street; equip reporters at The Telegraph Group, a major British media organization, with anytime, anywhere communications for video-streaming and multimedia; and allow editors, analysts and business staff at The Economist Group's second London office to communicate more effectively. Spectators to Montreal Canadiens' hockey games at the Bell Centre will spend less time in line-ups and more time cheering on their favorite team once the entertainment complex goes wireless with a Nortel secure wireless network. And Nortel Government Solutions was chosen to operate and maintain digital courtroom systems for the Nuclear Regulatory Commission.

    Following the Verizon and KTF contracts announced in July, Nortel demonstrated momentum across its wireless portfolio. Embratel selected Nortel for the expansion of wireless services in Brazil, further extending the company's No. 2 position in CDMA, and Craig Wireless will use Nortel technology to launch the first WiMAX commercial network in Greece. In addition, Nortel reinforced its GSM-R leadership position, announcing contracts spanning three continents. Nortel's solutions will improve safety and efficiency for Indian Railways; implement African Railway's first digital wireless system; and provide communications for Spain's first international high speed railway line.

    Nortel also demonstrated momentum for its Metro Ethernet Networks business which was formed in the third quarter. Nortel will deploy a Carrier Ethernet solution for Shanghai Telecom, enabling them to provide customers in China's largest city high-bandwidth, business-critical voice, data and video applications. In addition, Nortel continues to gain traction with the optical Multiservice Edge (OME) 6500, announcing wins with COLT, Golden Telecom, and Southern Cross. The OME portfolio continues to play a pivotal role helping networks evolve to support the high bandwidth data services of today and video services of tomorrow.

    Carrier VoIP contracts in the third quarter spanned the globe, including both Swisscom and Sunrise, leading Swiss telecommunications companies; Videotron, Quebec's leading cable operator; U.S. telecommunications providers Golden West Telecom and Venture Communications Cooperative; and KVH Co. Ltd, a leading provider of business communication and managed IT services in Asia Pacific. In addition, Nortel has also been selected to deliver new VoIP entertainment and broadband services for the COMCOR group of companies in Moscow.

    Nortel also announced a series of customer wins for its Secure Router portfolio, which is based on its acquisition of Tasman Networks. Hanson Professional Services, Inc., Austin Cancer Centers and Superior Community Credit Union are using Nortel's Secure Routers as a low-cost, high performance solution for secure converged communications.

    Partnerships

    LG-Nortel, the LG Electronics and Nortel Joint Venture, launched ARIA SOHO, a smart communications system to help boost employee productivity, streamline business operations and enhance customer service. Its simplicity and ease of use is expected to be of particular appeal to SMB and home office users.

    Nortel announced a joint collaboration with Runcom to develop new technologies that will enable the development of new, WiMAX-enabled devices, delivering media-rich content to mobile users. Through Nortel's leadership in 4G and Runcom's developments in Mobile WiMAX chipset technologies, the two will collaborate to provide technologies and products that overcome transmission interruptions and delays that may disrupt new high-bandwidth applications.

    Nortel is teaming up with Broadstream Communications, the industry leader in IPTV content transport and management services, to provide a complete IPTV solution that now includes both video infrastructure and television programming. Nortel is also collaborating with TELUS to create a unique communications and entertainment experience for TELUS' customers as part of their Future Friendly Home initiative.

    Leading Next Generation Solutions

    Looking forward, Nortel is dramatically rewriting the economics of wireless networking with the introduction of its Mobile WiMAX portfolio. Nortel unveiled a new demonstration of real-time, multimedia IPTV and IMS services over a live high-speed, 4G WiMAX network. Nortel also announced plans to launch a mobile WiMAX field trial based on Nortel 4G technology in Moscow for Golden Telecom. Nortel's WiMAX solutions are being trialed with carriers in Asia, Europe and the Americas - and have been deployed by Netago Wireless with the Special Areas Board of Alberta in Canada and by Craig Wireless in Greece.

    In third quarter, Nortel also began volume shipment of EV-DO Rev A, a next-generation technology that increases the uplink capacity of wireless networks.

    Takamatsu City Shopping Arcade, the longest covered shopping mall in Japan, is trialing Nortel wireless mesh technology to provide mobile Internet access, VoIP and smart card transactions for businesses and customers.

    Business Strategy Momentum

    Nortel signed a non-binding Memorandum of Understanding in the third quarter to sell its UMTS access business to Alcatel. This move will enable Nortel to simplify its business and strategically focus its investments for leadership in key markets while ensuring customers' UMTS access requirements will continue to be met.

    Nortel made progress on its revenue stimulation strategy by enhancing its go-to-market plan for the small and medium business (SMB) market. Building on the July 2006 announcement of expanded value-added distributor agreements in North America, Nortel introduced new SMB initiatives to better support current SMB resellers, broaden the channel base and evolve SMB customers. In addition, it launched a program focused on accelerating the recruitment and development of new, qualified European SMB resellers.

    Also in the third quarter, Nortel introduced a new operational model for its Global Services business unit, to better focus on global business development, drive vertical market solutions, and expand its services partner ecosystem. Nortel is also investing in the evolution of its services tools and core processes using a Lean Six Sigma approach. Regionally, Nortel strengthened services delivery by establishing local accountability for skills development and acquisition, sales effectiveness, and customer satisfaction. This is expected to make Nortel more nimble in responding to the needs of global enterprise customers like London-based Rolls-Royce and service providers like India's Bharti Airtel Limited, each of which recently signed long-term managed services agreements with Nortel.

    In July, Nortel announced part of its strategy to drive new growth for the business - a strategic alliance with Microsoft. The agreement spans technology, marketing and business - and includes joint product development, solutions and systems integration, and go-to-market initiatives for Unified Communications.

    About Nortel

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

    Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates", "targets", "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 3.9% which is higher than the growth rate in 2005; global service provider capital expenditures in 2006 reflecting mid to high 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 approval of its proposed class action settlement; 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; the sufficiency of recently announced restructuring actions, including the potential for higher actual costs to be incurred in connection with these restructuring actions compared to the estimated costs of such actions and the ability to achieve the targeted cost savings and reductions of Nortel's unfunded pension liability deficit; 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, including completion of the sale of its UMTS access business to Alcatel; 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 support 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 support facility; 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 the planned 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.

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

@@start.t1@@        Nortel will host a teleconference/audio webcast to discuss
        Third Quarter 2006 Results.
        TIME:        8:00 AM - 9:00 AM EDT on Tuesday, November 7th, 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/q3earnings2006
        International:  1-416-620-2417
        Replay:
        (Available one hour after the conference call)
        North America:  1-800-383-0935         Passcode: 21307163
                                                                                followed by the number sign
        International:  1-402-530-5545         Passcode: 21307163
                                                                                followed by the number sign
        Webcast:            http://www.nortel.com/q3earnings2006@@end@@

@@start.t2@@                                         NORTEL NETWORKS CORPORATION
                Condensed Consolidated Statements of Operations (unaudited)
            (U.S. GAAP; Millions of U.S. dollars, except per share amounts)
                                                  Three months ended              Nine months ended
                                    -------------------------------- ---------------------
                                      September      June 30, September  September  September
                                        30, 2006         2006      30, 2005    30, 2006    30, 2005
                                    -------------------------------- ---------------------
                                                                                As                                As
                                                                          restated                      restated
        Revenues:
          Products          US$    2,640  US$ 2,421  US$ 2,193  US$ 7,141  US$ 6,684
          Services                        315            323            325            940            842
                                    -------------------------------- ---------------------
        Total revenues              2,955         2,744         2,518         8,081         7,526
                                    -------------------------------- ---------------------
        Cost of Revenues:
          Products                    1,646         1,502         1,350         4,453         3,941
          Services                        184            176            190            529            461
                                    -------------------------------- ---------------------
        Total cost of
         revenues                      1,830         1,678         1,540         4,982         4,402
                                    -------------------------------- ---------------------
        Gross profit                 1,125         1,066            978         3,099         3,124
        Selling, general
         and administrative
         expense                          605            596            567         1,796         1,733
        Research and
         development expense        480            489            443         1,447         1,405
        Amortization of
         intangibles                        8                6                7              19              11
        In-process research
         and development
         expense                              -              16                -              16                -
        Special charges                 25              45              39              75            145
        (Gain) loss on sale
         of businesses and
         assets                            (16)            10                3            (41)            36
        Shareholder litigation
         settlement (recovery)      38          (510)              -          (453)              -
                                    -------------------------------- ---------------------
        Operating earnings
         (loss)                          (15)          414            (81)          240          (206)
        Other income - net          51              51              53            171            181
        Interest expense
          Long-term debt            (85)          (59)          (54)         (190)         (155)
          Other                          (20)          (11)            (3)          (55)            (7)
                                    -------------------------------- ---------------------
        Earnings (loss) from
         continuing operations
         before income taxes,
         minority interests
         and equity in net
         earnings (loss) of
         associated companies    (69)          395            (85)          166          (187)
        Income tax expense          (9)          (27)          (39)          (59)          (46)
                                    -------------------------------- ---------------------
                                              (78)          368          (124)          107          (233)
        Minority interests
         - net of tax                 (19)              1            (15)            (9)          (46)
        Equity in net
         earnings (loss)
         of associated
         companies -
         net of tax                      (2)            (3)              1              (7)              3
                                    -------------------------------- ---------------------
        Net earnings (loss)
         from continuing
         operations                    (99)          366          (138)            91          (276)
        Net earnings (loss)
         from discontinued
         operations -
         net of tax                         -                -                2                -                3
                                    -------------------------------- ---------------------
        Net earnings (loss)
         before cumulative
         effect of accounting
         change                          (99)          366          (136)            91          (273)
        Cumulative effect
         of accounting
         change - net
         of tax                              -                -                -                9                -
                                    -------------------------------- ---------------------
        Net earnings
         (loss)                  US$  (99) US$    366  US$  (136) US$    100  US$  (273)
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------
        Average shares
         outstanding
         (millions) -
         Basic                          4,339         4,339         4,339         4,339         4,338
        Average shares
         outstanding
         (millions) -
         Diluted                        4,339         4,340         4,339         4,340         4,338
        Basic and diluted
         earnings (loss)
         per common share
          - from continuing
              operations        US$ (0.02) US$  0.08  US$ (0.03) US$  0.02 US$ (0.06)
          - from discontinued
              operations                0.00          0.00          0.00          0.00          0.00
                                    -------------------------------- ---------------------
        Basic earnings
         (loss) per common
         share                    US$ (0.02) US$  0.08  US$ (0.03) US$  0.02 US$ (0.06)
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------@@end@@

@@start.t3@@                                         NORTEL NETWORKS CORPORATION
                        Condensed Consolidated Balance Sheets (unaudited)
            (U.S. GAAP; Millions of U.S. dollars, except for share amounts)
                                                          ----------------------------------------
                                                          September 30,    June 30,      December 31,
                                                                    2006              2006                2005
                                                          ------------- ------------ -------------
                                            ASSETS
        Current assets
          Cash and cash equivalents              US$ 2,600      US$ 1,904        US$ 2,951
          Restricted cash and cash
            equivalents                                            628                646                  77
          Accounts receivable - net                    2,804            2,785              2,862
          Inventories - net                                 1,834            2,035              1,804
          Deferred income taxes - net                    405                348                 377
          Other current assets                                755                833                 796
                                                          ------------- ------------ -------------
        Total current assets                                9,026            8,551              8,867
        Investments                                                 211                209                 244
        Plant and equipment - net                        1,559            1,574              1,564
        Goodwill                                                  2,589            2,588              2,592
        Intangible assets - net                              184                205                 172
        Deferred income taxes - net                    3,651            3,728              3,629
        Other assets                                                979                971              1,044
                                                          ------------- ------------ -------------
        Total assets                                  US$  18,199  US$  17,826    US$  18,112
                                                          ------------- ------------ -------------
                                                          ------------- ------------ -------------
                  LIABILITIES AND SHAREHOLDERS' EQUITY
        Current liabilities
          Trade and other accounts payable  US$    949      US$ 1,065        US$ 1,180
          Payroll and benefit-related
            liabilities                                            793                861                 801
          Contractual liabilities                          233                258                 346
          Restructuring liabilities                         93                111                  95
          Other accrued liabilities                    4,356            4,517              4,200
          Long-term debt due within one year          18                 18              1,446
                                                          ------------- ------------ -------------
        Total current liabilities                        6,442            6,830              8,068
        Long-term debt                                         4,446            3,752              2,439
        Deferred income taxes - net                        107                107                 104
        Other liabilities                                    5,147            5,238              5,935
                                                          ------------- ------------ -------------
        Total liabilities                                  16,142          15,927            16,546
                                                          ------------- ------------ -------------
        Minority interests in subsidiary
         companies                                                  742                738                 780
                            SHAREHOLDERS' EQUITY
        Common shares, without par value -
         Authorized shares: unlimited;
          Issued and outstanding shares:
            4,339,356,226 as of
            September 30, 2006,
            4,339,368,770 as of
            June 30, 2006 and
            4,339,162,932 as of
            December 31, 2005                              33,936          33,932            33,932
        Additional paid-in capital                      3,352            3,326              3,281
        Accumulated deficit                            (35,425)        (35,326)         (35,525)
        Accumulated other
         comprehensive loss                                 (548)            (771)              (902)
                                                          ------------- ------------ -------------
        Total shareholders' equity                      1,315            1,161                 786
                                                          ------------- ------------ -------------
        Total liabilities and
         shareholders' equity                      US$ 18,199    US$ 17,826      US$ 18,112
                                                          ------------- ------------ -------------
                                                          ------------- ------------ -------------@@end@@

@@start.t4@@                                         NORTEL NETWORKS CORPORATION
                Condensed Consolidated Statements of Cash Flows (unaudited)
                                 (U.S. GAAP; Millions of U.S. dollars)
                                                  Three months ended              Nine months ended
                                    -------------------------------- ---------------------
                                      September      June 30, September  September  September
                                        30, 2006         2006      30, 2005    30, 2006    30, 2005
                                    -------------------------------- ---------------------
                                                                                As                                As
                                                                          restated                      restated
        Cash flows from
         (used in) operating
         activities
          Net earnings
            (loss)                US$ (99) US$    366  US$  (136) US$    100  US$  (273)
          Adjustments to
            reconcile net
            earnings (loss)
            to net cash from
            (used in) operating
            activities from
            continuing
            operations, net
            of effects from
            acquisitions and
            divestitures of
            businesses:
              Amortization and
                depreciation            86              76              73            222            233
              Non-cash portion
                of shareholder
                litigation
                settlement
                expense (recovery)  38          (510)              -          (453)              -
              Non-cash portion
                of special
                charges and
                related asset
                write downs              12                -                1              12                3
              Non-cash portion
                of in-process
                research and
                development
                expense                      -              16                -              16                -
              Equity in net
                (earnings)
                loss of
                associated
                companies                  2                3              (1)              7              (3)
              Stock option
                compensation            30              28              22              83              58
              Deferred income
                taxes                        20              38              44              74              56
              Cumulative effect
                of accounting
                change                        -                -                -              (9)              -
              Net (earnings)
                loss from
                discontinued
                operations                 -                -              (2)              -              (3)
              Other liabilities      81              86              75            240            256
              (Gain) loss on
                sale or write
                down of
                investments,
                businesses and
                assets                      (9)              8                3            (35)            20
              Other - net                40            183              70            326              (7)
              Change in operating
                assets and
                liabilities          (247)         (402)         (293)         (911)         (637)
                                    -------------------------------- ---------------------
          Net cash from
            (used in) operating
            activities of
            continuing
            operations                 (46)         (108)         (144)         (328)         (297)
                                    -------------------------------- ---------------------
        Cash flows from
         (used in) investing
         activities
          Expenditures for
            plant and
            equipment                  (83)          (78)          (52)         (260)         (176)
          Proceeds on
            disposals of
            plant and
            equipment                    36                2                -            125              10
          Restricted cash
            and cash
            equivalents - net        21          (570)              -          (546)              9
          Acquisitions of
            investments and
            businesses - net
            of cash acquired         (9)            (4)            (1)         (134)         (449)
          Proceeds on sale
            of investments
            and businesses            88              81            141            199            308
                                    -------------------------------- ---------------------
          Net cash from
            (used in) investing
            activities of
            continuing
            operations                  53          (569)            88          (616)         (298)
                                    -------------------------------- ---------------------
        Cash flows from
         (used in) financing
         activities
          Dividends paid
            by subsidiaries
            to minority
            interests                  (15)          (13)            (9)          (46)          (33)
          Increase in
            notes payable              61              23              21              88              59
          Decrease in
            notes payable            (18)            (9)          (18)          (30)          (64)
          Proceeds from
            issuance of
            long-term debt        2,000                -                -         3,300                -
          Repayment of
            long-term debt      (1,300)         (150)              -        (2,725)              -
          Debt issuance
            cost                          (42)              -                -            (42)              -
          Decrease in
            capital leases
            payable                        (3)            (4)            (3)          (12)            (8)
          Issuance of
            common shares                -                -                3                1                4
                                    -------------------------------- ---------------------
          Net cash from
            (used in) financing
            activities of
            continuing
            operations                 683          (153)            (6)          534            (42)
                                    -------------------------------- ---------------------
        Effect of foreign
         exchange rate
         changes on cash
         and cash equivalents        6              39              (1)            59            (86)
                                    -------------------------------- ---------------------
        Net cash from
         (used in) continuing
         operations                    696          (791)          (63)         (351)         (723)
        Net cash from
         (used in) operating
         activities of
         discontinued
         operations                        -                -                -                -              34
                                    -------------------------------- ---------------------
        Net increase
         (decrease) in
         cash and cash
         equivalents                  696          (791)          (63)         (351)         (689)
        Cash and cash
         equivalents at
         beginning of period  1,904         2,695         3,059         2,951         3,685
                                    -------------------------------- ---------------------
        Cash and cash
         equivalents at
         end of period      US$ 2,600  US$ 1,904  US$ 2,996  US$ 2,600  US$ 2,996
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------@@end@@

@@start.t5@@                                         NORTEL NETWORKS CORPORATION
                         Consolidated Financial Information (unaudited)
                                 (U.S. GAAP; Millions of U.S. dollars)
        Segmented revenues
        The following table summarizes our revenue by reportable segment for:
                                                  Three months ended              Nine months ended
                                    -------------------------------- ---------------------
                                      September      June 30, September  September  September
                                        30, 2006         2006      30, 2005    30, 2006    30, 2005
                                    -------------------------------- ---------------------
                                                                                As                                As
                                                                          restated                      restated
        Revenues
        Mobility and
         Converged Core
         Networks                US$ 1,540  US$ 1,433  US$ 1,251  US$ 4,255  US$ 3,953
        Enterprise Solutions        609            475            534         1,523         1,608
        Metro Ethernet
         Networks                         430            465            363         1,201            998
        Global Services                316            309            305            916            883
                                    -------------------------------- ---------------------
        Total reportable
         segments                      2,895         2,682         2,453         7,895         7,442
        Other                                 60              62              65            186              84
                                    -------------------------------- ---------------------
        Total revenues        US$ 2,955  US$ 2,744  US$ 2,518  US$ 8,081  US$ 7,526
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------
        Geographic revenues
        The following table summarizes our geographic revenues based on the
        location of the customer for:
                                                  Three months ended              Nine months ended
                                    -------------------------------- ---------------------
                                      September      June 30, September  September  September
                                        30, 2006         2006      30, 2005    30, 2006    30, 2005
                                    -------------------------------- ---------------------
                                                                                As                                As
                                                                          restated                      restated
        Revenues
        United States         US$ 1,311  US$ 1,114  US$ 1,254  US$ 3,557  US$ 3,846
        EMEA(a)                            809            894            618         2,334         1,956
        Canada                              224            139            160            522            438
        Asia                                 474            449            312         1,224            861
        CALA(b)                            137            148            174            444            425
                                    -------------------------------- ---------------------
        Total revenues        US$ 2,955  US$ 2,744  US$ 2,518  US$ 8,081  US$ 7,526
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------
        (a) Europe, Middle East and Africa
        (b) Caribbean and Latin America
        Network Solutions revenues
        The following table summarizes our revenues by category of network
        solutions for each of our reportable segments for:
                                                  Three months ended              Nine months ended
                                    -------------------------------- ---------------------
                                      September      June 30, September  September  September
                                        30, 2006         2006      30, 2005    30, 2006    30, 2005
                                    -------------------------------- ---------------------
                                                                                As                                As
                                                                          restated                      restated
        Revenues
        Mobility and
         Converged Core
         Networks
          CDMA solutions    US$    704  US$    542  US$    514  US$ 1,722  US$ 1,606
          GSM and UMTS
            solutions                    563            664            522         1,796         1,704
          Circuit and
            packet voice
            solutions                    273            227            215            737            643
                                    -------------------------------- ---------------------
                                            1,540         1,433         1,251         4,255         3,953
        Enterprise Solutions
          Circuit and
            packet voice
            solutions                    430            321            357         1,054         1,122
          Data networking
            and security
            solutions                    179            154            177            469            486
                                    -------------------------------- ---------------------
                                                609            475            534         1,523         1,608
        Metro Ethernet
         Networks
          Optical
            networking
            solutions                    312            295            259            828            709
          Data networking
            and security
            solutions                    118            170            104            373            289
                                    -------------------------------- ---------------------
                                                430            465            363         1,201            998
        Global Services                316            309            305            916            883
        Other                                 60              62              65            186              84
                                    -------------------------------- ---------------------
        Total revenues        US$ 2,955  US$ 2,744  US$ 2,518  US$ 8,081  US$ 7,526
                                    -------------------------------- ---------------------
                                    -------------------------------- ---------------------@@end@@

@@start.t6@@                                         NORTEL NETWORKS CORPORATION
                         Consolidated Financial Information (unaudited)
                                 (U.S. GAAP; Millions of U.S. dollars)
        Segmented revenues
        The following table summarizes our historical revenue reflecting the new
        reportable segments:
                                                                         Three months ended
                                                 ----------------------------------------------
                                                                                    2005
                                                 ----------------------------------------------
                                                  March 31        June 30 September 30 December 31
                                                 ----------------------------------------------
                                                         As                As                As
                                                    restated      restated      restated
        Revenues
        Mobility and Converged Core
         Networks
          CDMA solutions                 US$    505    US$    587    US$    514    US$    577
          GSM and UMTS solutions              673              509              522              884
          Circuit and packet
            voice solutions                        191              237              215              255
                                                 ----------------------------------------------
                                                         1,369          1,333          1,251          1,716
        Enterprise Solutions
          Circuit and packet voice
            solutions                                 308              457              357              355
          Data networking and
            security solutions                  157              152              177              147
                                                 ----------------------------------------------
                                                            465              609              534              502
        Metro Ethernet Networks
          Optical networking
            solutions                                 198              252              259              309
          Data networking and
            security solutions                    91                94              104              120
                                                 ----------------------------------------------
                                                            289              346              363              429
        Global Services                            265              313              305              287
        Other                                                1                18                65                63
                                                 ----------------------------------------------
        Total revenues                    US$ 2,389    US$ 2,619    US$ 2,518    US$ 2,997
                                                 ----------------------------------------------
                                                 ----------------------------------------------
                                                                Three months ended
                                                  ----------------------------------
                                                                          2006
                                                  ----------------------------------
                                                    March 31      June 30  September 30
                                                  ----------------------------------
        Revenues
        Mobility and Converged Core
         Networks
          CDMA solutions                 US$    476    US$    542    US$    704
          GSM and UMTS solutions              569              664              563
          Circuit and packet
            voice solutions                        237              227              273
                                                  ----------------------------------
                                                         1,282          1,433          1,540
        Enterprise Solutions
          Circuit and packet voice
            solutions                                 303              321              430
          Data networking and
            security solutions                  136              154              179
                                                  ----------------------------------
                                                            439              475              609
        Metro Ethernet Networks
          Optical networking
            solutions                                 221              295              312
          Data networking and
            security solutions                    85              170              118
                                                  ----------------------------------
                                                            306              465              430
        Global Services                            291              309              316
        Other                                              64                62                60
                                                  ----------------------------------
        Total revenues                    US$ 2,382    US$ 2,744    US$ 2,955
                                                  ----------------------------------
                                                  ----------------------------------@@end@@

    MCCN provides mobility networking solutions using (i) CDMA solutions, and GSM and UMTS solutions and (ii) carrier circuit and packet voice solutions. MEN combines our optical networking solutions and the carrier portion of our data networking solutions. ES provides (i) enterprise circuit and packet voice solutions, and (ii) data networking and security solutions, which supply data, voice and multimedia communications solutions to our enterprise customers and software solutions for multi- media messaging, conferencing and call centers. GS provides a broad range of services to address the requirements of our carrier and enterprise customers and is organized into four main service groups; (i) Network implementation services (Network integration, planning, installation, optimization and security services), (ii) Network Support Services (Technical support, hardware maintenance, equipment spares logistics and on-site engineers), (iii) Network managed services (Monitor and manage customer networks and provide a range of network managed service options) and (iv) Network Application Services (Applications development, integration and web services).

    Revenue from networking services consisting of planning, engineering and installation are generally bundled with product sales and are not currently included in the revenues of GS.

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

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



Weitere Meldungen: Nortel Networks

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