Nortel Networks

Nortel Provides Clarification On Restatement Review

    Toronto (ots/PRNewswire) -

    Nortel(x) Networks Corporation (NYSE/TSX: NT) issued a clarification of certain matters reported in the press relating to its announcement on March 10, 2006 concerning the need to restate certain prior period financial results. The Company wishes to clarify that Nortel's internal and external auditors have not undertaken an investigation as to whether any improper conduct may be associated with the need to effect the latest restatement.

    The internal and external reviews referenced in the press related to an extensive contract review that was undertaken as part of remedial efforts relating to internal control deficiencies. As previously announced, the review related primarily to the Company's accounting for complex contractual arrangements under American Institute of Certified Public Accountants Statement of Position ("SOP") 81-1, "Accounting for Performance of Construction-Type and Certain Production-Type Contracts", and SOP 97-2, "Software Revenue Recognition". This work and other discussions with Nortel's independent auditors resulted in the determination that certain revenue recognized in prior periods should have been deferred and recognized in future periods for contracts involving multiple deliverable elements, including upon the delivery of undelivered elements such as hardware, software and/or services. While the Company has not become aware of any wrongdoing as a result of this extensive contract review, and none was apparent, this review was not focused on conduct matters. The Company will continue to examine this aspect.

    About Nortel

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

    Certain statements in this press release may contain words such as "could", "expects", "may", "anticipates", "believes", "intends", "estimates",  "plans", "envisions", "seeks" and other similar language and are considered  forward-looking statements. These statements are based on Nortel's current  expectations, estimates, forecasts and projections about the operating  environment, economies and markets in which Nortel operates. These statements  are subject to important assumptions, risks and uncertainties, which are difficult to predict and the actual outcome may be materially different.

    Further, actual results or events could differ materially from those  contemplated in forward-looking statements as a result of the following  (i) risks and uncertainties relating to Nortel's restatements and related  matters including: Nortel's restatement announced in this press release and  two previous restatements of its financial statements and related events and  that the previously filed financial statements of Nortel and NNL and related  audit reports should not be relied upon; the negative impact on Nortel and NNL of their announced restatement and delay in filing their financial  statements and related periodic reports causing them to breach their public debt indentures and obligations under their credit facilities with the  possibility that the holders of their public debt or NNL's lenders would  seek to accelerate the maturity of that debt; and causing a breach of NNL's  support facility with EDC with the possibility that EDC would refuse to issue  additional support under the facility, terminate its commitments under the facility or require NNL to cash collateralize all existing support; legal  judgments, fines, penalties or settlements, or any substantial regulatory  fines or other penalties or sanctions, related to the ongoing regulatory and  criminal investigations of Nortel in the U.S. and Canada; any significant  pending civil litigation actions not encompassed by Nortel's proposed class  action settlement; any substantial cash payment and/or significant dilution  of Nortel's existing equity positions resulting from the finalization and approval of its proposed class action settlement, or if such proposed class  action settlement is not finalized, any larger settlements or awards of  damages in respect of such class actions; any unsuccessful remediation of  Nortel's material weaknesses in internal control over financial reporting  resulting in an inability to report Nortel's results of operations and  financial condition accurately and in a timely manner; the time required to  implement Nortel's remedial measures; Nortel's inability to access, in its  current form, its shelf registration filed with the United States Securities  and Exchange Commission (SEC), and Nortel's below investment grade credit rating and any further adverse effect on its credit rating due to Nortel's  restatement of its financial statements announced in this press release; any  adverse affect on Nortel's business and market price of its publicly traded  securities arising from continuing negative publicity related to Nortel's  restatements; Nortel's potential inability to attract or retain the personnel  necessary to achieve its business objectives; any breach by Nortel of the continued listing requirements of the NYSE or TSX causing the NYSE and/or the  TSX to commence suspension or delisting procedures; any default in Nortel's  filing obligations extending beyond two months from the date hereof (May 9,  2006) causing any Canadian securities regulatory authority to impose an order  to cease all trading in Nortel's securities within the applicable  jurisdiction or to impose such an order sooner if Nortel fails to comply  with the alternate information guidelines of such regulatory authorities;  (ii) risks and uncertainties relating to Nortel's business including:  yearly and quarterly fluctuations of Nortel's operating results; reduced demand and pricing pressures for its products due to global economic conditions, significant competition, competitive pricing practice, cautious  capital spending by customers, increased industry consolidation, rapidly  changing technologies, evolving industry standards, frequent new product  introductions and short product life cycles, and other trends and industry  characteristics affecting the telecommunications industry; any material and  adverse affects on Nortel's performance if its expectations regarding market  demand for particular products prove to be wrong or because of certain  barriers in its efforts to expand internationally; any reduction in  Nortel's operating results and any related volatility in its market price of its publicly traded securities arising from any decline in its gross margin,  or fluctuations in foreign currency exchange rates; any negative developments  associated with Nortel's supply contract and contract manufacturing  agreements including as a result of using a sole supplier for key optical  networking solutions components, and any defects or errors in Nortel's  current or planned products; any negative impact to Nortel of its failure  to achieve its business transformation objectives; restrictions on how Nortel  and its president and chief executive officer conduct its business arising from a settlement with Motorola Inc.; additional valuation allowances for  all or a portion of its deferred tax assets; Nortel's failure to protect  its intellectual property rights, or any adverse judgments or settlements  arising out of disputes regarding intellectual property; changes in  regulation of the Internet and/or other aspects of the industry;  Nortel's failure to successfully operate or integrate its strategic  acquisitions, or failure to consummate or succeed with its strategic  alliances; any negative affect of Nortel's failure to evolve adequately  its financial and managerial control and reporting systems and processes,  manage and grow its business, or create an effective risk management  strategy; and (iii) risks and uncertainties relating to Nortel's liquidity,  financing arrangements and capital including: the impact of Nortel's restatement announced in this press release and two previous restatements  of its financial statements; any acceleration under their public debt  indentures and credit facilities, which may result in Nortel and NNL  being unable to meet their respective payment obligations; any inability  of Nortel to manage cash flow fluctuations to fund working capital  requirements or achieve its business objectives in a timely manner  or obtain additional sources of funding; high levels of debt, limitations  on Nortel capitalizing on business opportunities because of credit facility  covenants, or on obtaining additional secured debt pursuant to the provisions  of indentures governing certain of Nortel's public debt issues and the provisions of its credit facilities; any increase of restricted cash requirements for Nortel if it is unable to secure alternative support for  obligations arising from certain normal course business activities, or  any inability of Nortel's subsidiaries to provide it with sufficient  funding; any negative affect to Nortel of the need to make larger  defined benefit plans contributions in the future or exposure to customer  credit risks or inability of customers to fulfill payment obligations under  customer financing arrangements; any negative impact on Nortel's ability to  make future acquisitions, raise capital, issue debt and retain employees  arising from stock price volatility and further declines in Nortel's market  price of its publicly traded securities, or any future share consolidation resulting in a lower total market capitalization or adverse affect on the  liquidity of Nortel's common shares. For additional information with respect  to certain of these and other factors, see the most recent Annual Report on  Form 10-K and Quarterly Report on Form 10-Q filed by Nortel with the SEC.  Unless otherwise required by applicable securities laws, Nortel disclaims any  intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

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