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	     NT   5.92 -0.03    Nortel Networks Reports Results for Third Quarter 2001   TORONTO, Oct 18, 2001 (BUSINESS WIRE) -- Nortel Networks Corporation(b) (NYSE:NT)(TSE:NT.):         --  Revenues from continuing operations: US$3.7 billion     --  Pro forma net loss(a) per share: US$0.68; before incremental         charges: US$0.27     --  Net loss from continuing operations: US$3.5 billion     --  Positive operating cashflow contributes to increase in cash to         US$3.4 billion    Nortel Networks Corporation(b) (NYSE:NT)(TSE:NT.) today reported results for the third quarter and first nine months of 2001 prepared in accordance with US generally accepted accounting principles.   Revenues from continuing operations were US$3.69 billion for the third quarter of 2001 compared to US$6.73 billion in the same period in 2000. Pro forma net loss from continuing operations(a) for the third quarter of 2001, excluding incremental provisions and other charges, was US$854 million or US$0.27 per common share. Including the incremental provisions and other charges, pro forma net loss from continuing operations(a) for the third quarter of 2001 was US$2.18 billion, or US$0.68 per common share, compared to pro forma net earnings of US$597 million, or US$0.19 per common share on a diluted basis, for the same period in 2000.   In the quarter, incremental charges included in the pro forma net loss from continuing operations(a) were comprised of: US$750 million (pre-tax) for excess and obsolete inventory, primarily related to Optical Inter-City; US$767 million (pre-tax) for increased provisions related to trade receivables and customer financing; and US$380 million (pre-tax) primarily related to charges associated with certain third party investments. The Company also recorded: a US$801 million (pre-tax) charge for restructuring associated with the completion of the workforce reductions and facilities closures announced in June 2001; and a US$223 million (pre-tax) charge primarily related to the approximately 50 percent reduction in manufacturing capacity of its Photonics Components business.   Including Acquisition Related Costs(a), stock option compensation from acquisitions and divestitures, and one-time gains and charges, Nortel Networks recorded a net loss from continuing operations in the third quarter of 2001 of US$3.47 billion or US$1.08 per common share.   "Revenues for the quarter reflected the challenges presented as the telecom industry adjusted to new levels of spending," said John Roth, president and chief executive officer Nortel Networks. "Our bottom line results reflected the impact of actions we have taken to adjust to the new business levels. During the third quarter of 2001, Nortel Networks continued to aggressively implement its work plan to reduce its cost structure and streamline operations. The Company is in the final stages of implementing a cost structure to drive break even at a quarterly revenue level well below US$4 billion. The structure is expected to be in place in the first quarter of 2002."   Frank Dunn, the Company's new president and chief executive officer effective November 1, 2001, said, "Nortel Networks is focusing its investments and its organization to drive continued leadership across three businesses: Metro Networks, which encompasses metro optical networking, IP networking, IP services and voice over IP solutions for service providers and enterprises; Wireless Networks; and Optical Long Haul Networks. In the quarter, our product programs continued to advance as we focused on building on our industry-leading portfolio of solutions. We also continued to work with our customers to help them plan and deploy the solutions that will position them to drive reductions in their cost of operations and enable them to take advantage of opportunities for new revenue streams. Some key milestones over the past 120 days included:         --  the First North American ILEC began the circuit to packet         transition with the deployment of our carrier-grade         softswitch;     --  Announced Metro DWDM wins in the United States, Europe and         Japan;     --  Announced Multiservice backbone awards (ATM, IP, MPLS) in         China, Germany and Asia;     --  Continued progress on 3G Wireless Internet infrastructure         deployments and completed the first commercial UMTS test calls         and the first CDMA2000 1X mobile IP call;     --  Introduced advances in IP solutions, including an integrated         Layer 4-7 content switching capability on our Layer 2-3 Edge         Switch Router; and     --  Completed hardware design, significantly advanced software         integration and began production of OPTera Connect HDX         solution."    As announced on October 2, 2001, the Company expects to have an overall workforce of approximately 45,000 after the completion of its work plan. Notifications to employees impacted by workforce reductions are expected to be substantially completed by the end of October 2001. A workforce reduction and related charge will be recorded in the fourth quarter of 2001. Over the next few quarters, the Company also expects to continue to divest non-core businesses in accordance with its work plan. The number of positions which will be impacted by this divesture activity (including the impact of divestures announced or completed to date) is expected to ultimately approach 10,000 positions.   Commenting on cash management in the quarter, Frank Dunn said, "We are extremely pleased with the results that have been generated from our focus on cash management, which drove a significant improvement in cash and contributed to positive cashflow from operations. In addition, the Company further increased its financial flexibility by completing a highly successful US$1.8 billion convertible debt issue which, combined with positive operating cash performance from continuing operations and a significant reduction in short term debt, has significantly enhanced our strong liquidity position. Given the industry correction and actions we have taken over the last two quarters, Nortel Networks balance sheet is well positioned."   "While we believe we are beginning to see early indications that capital spending by service providers is approaching sustainable levels, it still remains difficult to predict. In light of this and the uncertainty regarding the potential impacts of events taking place in the wake of the September 11, 2001 tragedies and their effect on economies and businesses around the world, we are not providing guidance for the fourth quarter of 2001 or the full year 2002 at this time," concluded Dunn.         Revenue Breakdown from Continuing Operations    Network Infrastructure revenues decreased 48 percent in the third quarter of 2001 compared to the third quarter of 2000. Wireless Internet solutions grew substantially in Canada and slightly in Asia, which was more than offset by a considerable decline in Latin America, a slight decline in the United States and a decline in Europe. Optical Inter-city revenues were down sharply in the United States, Europe and Latin America, minimally offset by growth in Asia. Local Internet revenues were down substantially in the United States, Europe, Canada and Latin America, which were minimally offset by an increase in Asia.   Photonic Components segment revenues were down 93 percent in the third quarter compared to the same period last year. The sharp decline in the segment was largely due to considerably lower sales of Nortel Networks Optical Inter-city solutions compared to the third quarter of 2000.   Other revenues declined 29 percent in the third quarter compared to the same period last year. Substantial growth in Global Professional Services in Europe and Asia, and strong growth in the United States, was more than offset by considerable declines in legacy voice solutions for corporations across all regions and wireless OEM revenues in most regions.   Commensurate with its announcement on October 2, 2001 to align its resources around three businesses (Metro Networks, Wireless Networks and Optical Long Haul Networks), Nortel Networks will evolve its financial reporting to reflect the new organization beginning in the fourth quarter of 2001.   Geographic revenues for the third quarter of 2001 compared to the same period in 2000 decreased 54 percent in the United States, 53 percent in Canada and 30 percent outside the United States and Canada.         Nine-Month Results    For the first nine months of 2001, revenues from continuing operations were US$14.06 billion compared to US$19.75 billion for the same period in 2000. Pro forma net loss from continuing operations(a) for the first nine months of 2001 was US$4.01 billion, or US$1.26 per common share, compared to pro forma net earnings of US$1.57 billion, or US$0.51 per common share on a diluted basis, for the same period in 2000. Including the net loss from discontinued access solutions operations, Acquisition Related Costs(a), stock option compensation from acquisitions and divestitures, one-time gains and charges, and the write down of intangible assets, Nortel Networks recorded a net loss of US$25.48 billion, or US$8.01 per common share, for the first nine months of 2001.         Spending Management    The Company continued to make rapid progress to reduce its cost structure. Compared to the Company's year-end 2000 cost structure, exclusive of incremental provisions and charges, the Company's cost structure at the end of the third quarter of 2001 is lower by approximately US$1 billion.         Gross Margin    Gross margin for the third quarter of 2001 was approximately 1 percent reflecting incremental charges of approximately US$750 million related to excess and obsolete inventory resulting from the expected decrease in sales due to the continued downturn in the market. Excluding the impact of these incremental and other contract-related charges, gross margin for the third quarter of 2001 was approximately 25 percent, compared to approximately 26 percent in the second quarter of 2001.         Expenses    Selling, general and administrative ("SG&A") expenses in the third quarter of 2001 were US$1.92 billion. The continued impact of the market adjustments and further decline in some of our of customers' financial condition resulted in incremental provisions of US$767 million in the quarter related to customer receivables and financings. Excluding the incremental provisions in both periods, SG?expenses in the third quarter of 2001, compared to second quarter of 2001, were down by approximately US$190 million.   Research and development ("R&D") expenses were US$808 million in the third quarter of 2001. The R?expenses in the quarter reflected focused investments to drive continued market leadership in our core businesses and the elimination of spending in all other areas. Compared to the second quarter of 2001, R? expenses in the third quarter of 2001 were down by approximately US$100 million, reflecting the impact of restructuring and streamlining operations.   The financial results of Nortel Networks Limited(b) ("NNL"), Nortel Networks Corporation's principal operating subsidiary, are fully consolidated into Nortel Networks results. NNL has preferred shares which are publicly traded in Canada. For the third quarter of 2001, NNL took a restructuring charge of US$793 million (pre-tax) associated with the completion of workforce reductions and the closure of certain facilities related to business streamlining; and recorded US$207 million (pre-tax) primarily related to the approximately 50 percent reduction in manufacturing capacity of the Photonics Components business. All such amounts are included in the consolidated Nortel Networks amounts described above.   Nortel Networks is a global leader in networking and communications solutions and infrastructure for service providers and corporations. The Company is at the forefront of transforming how the world communicates, exchanges information and profits from the high-performance Internet through capabilities spanning Metro Networks, Wireless Networks and Optical Long Haul Networks. Nortel Networks does business in more than 150 countries and can be found on the Web at www.nortelnetworks.com.   Certain information included in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in these statements may differ materially from actual results or events. Factors which could cause results or events to differ from current expectations include, among other things: the severity and duration of the industry adjustment; the sufficiency of our restructuring activities, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; fluctuations in operating results and general industry, economic and market conditions and growth rates; the ability to recruit and retain qualified employees; fluctuations in cash flow, the level of outstanding debt and debt ratings; the ability to make acquisitions and/or integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization in the telecommunications industry; the dependence on new product development; the uncertainties of the Internet; the impact of the credit risks of our customers and the impact of increased provision of customer financing and commitments; stock market volatility; the entrance into an increased number of supply, turnkey, and outsourcing contracts which contain delivery, installation, and performance provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; the ability to obtain timely, adequate and reasonably priced component parts from suppliers and internal manufacturing capacity; the future success of our strategic alliances; and the adverse resolution of litigation. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks Corporation and Nortel Networks Limited with the United States Securities and Exchange Commission. Unless otherwise required by applicable securities laws, Nortel Networks Corporation and Nortel Networks Limited disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.         (a) Pro forma net earnings/loss from continuing operations is         defined as reported net loss from continuing operations before         "Acquisition Related Costs" (in-process research and         development expense, and the amortization of acquired         technology and goodwill from all acquisitions subsequent to         July 1998), stock option compensation from acquisitions and         divestitures, and one-time gains and charges.     (b) On May 1, 2000, Nortel Networks Corporation acquired all of         the outstanding common shares of Nortel Networks Limited         (formerly called Nortel Networks Corporation) by way of a         Canadian court-approved plan of arrangement. Nortel Networks         Limited has preferred shares outstanding, which are publicly         traded in Canada. Nortel Networks Limited's financial results         have been consolidated into the results reported for Nortel         Networks Corporation.    Nortel Networks will host a teleconference/audio webcast to discuss Q3 Results. TIME:    5:00 p.m. - 6:00 p.m. EDT on Thursday, October 18, 2001 To participate, please call the following at least 15 minutes prior to the start of the event Teleconference:                   Webcast: North America:    888/363-8644    http://www.nortelnetworks.com/3q2001 International:    212/231-6044 Replay: (Available one hour after the conference until 5:00 p.m. EDT, Oct 28, 2001) North America:    800/633-8625    Passcode: 18244243# International:    416/626-4100    Passcode: 18244243# Webcast:          http://www.nortelnetworks.com/3q2001 Note to Editors: The code for the replay of the conference call ends with a pound sign. Passcode 18244243(pound sign). Nortel Networks, the Nortel Networks logo, the Globemark and OPTera are trademarks of Nortel Networks.                  NORTEL NETWORKS CORPORATION U.S. GAAP                  Consolidated Results (unaudited) (1)          (millions of U.S. dollars, except per share amounts)                              For the three months ended      Pro forma                       09/30/01  09/30/00  09/30/01  09/30/00  % Change                      ------------------- --------- --------- ---------                       Reported  Reported Pro forma Pro forma                                              A          B Revenues                $3,694    $6,726   $3,694     $6,726   (45%) Cost of revenues         3,673     3,617    3,673      3,617     2%                        -------- --------- --------  --------- Gross profit                21     3,109       21      3,109   (99%) Selling, general and  administrative expense  1,919     1,309    1,919      1,309    47% Research and  development expense       808       917      808        917   (12%) In-process research and  development expense        --        22       --         -- Amortization of  intangibles Acquired technology        185       217       --         -- Goodwill                   454     1,028        8         13 Stock option  compensation from  acquisitions and  divestitures               32        31       --         -- Special charges          1,024        --       --         -- Gain on sale of  businesses                (45)       --       --         --                        -------- --------- --------  ---------                         (4,356)     (415)  (2,714)       870 Equity in net loss of  associated companies       (6)      (16)      (6)        (1) Other income (expense)  - net                    (318)      200     (318)        31 Interest expense Long-term debt             (54)      (22)     (54)       (22) Other                      (23)      (17)     (23)       (17)                        -------- --------- --------  --------- Earnings (loss) before  income taxes           (4,757)     (270)  (3,115)       861   (462%) Income tax recovery  (provision)             1,289      (237)     933       (264)                        -------- --------- --------  --------- Net earnings (loss)  from continuing  operations             (3,468)     (507)  (2,182)       597 Net loss from  discontinued  operations (net of  tax) (2)                  --       (79)       --          --                        -------- --------- --------  --------- Net earnings (loss)    $(3,468)   $ (586) $(2,182)      $597   (465%)                        ======== ========= ========  ========= Basic earnings (loss)  per common share From continuing  operations            $ (1.08)  $ (0.17)  $(0.68)     $0.20 From discontinued  operations                 --     (0.03)     N/A        N/A                        -------- --------- --------  ---------                        $ (1.08)  $ (0.20)  $(0.68)     $0.20   (440%)                        ======== ========= ========  ========= Diluted earnings (loss)  per common share (3) From continuing  operations            $ (1.08)  $ (0.17)  $(0.68)     $0.19 From discontinued  operations                 --     (0.03)     N/A        N/A                        -------- --------- --------  ---------                        $ (1.08)  $ (0.20)  $(0.68)     $0.19   (458%)                        ======== ========= ========  ========= Dividends declared per  common share          $    --  $0.01875   $   --   $0.01875 Effective tax rate (4)     N/A       N/A    30.0%      30.4% Weighted average number  of common shares  outstanding  (in millions)       - basic            3,203     2,991    3,203      2,991       - diluted (3)      3,203     2,991    3,203      3,172     (1) These unaudited consolidated results for the three months         ended September 30, 2001 are preliminary and are subject to         change. Nortel Networks disclaims any intention or obligation         to update or revise these preliminary results prior to the         filing of its reported results for the three months ended         September 30, 2001.     (2) Reported results for the three months ended September 30, 2000         is net of an applicable income tax recovery of $12.     (3) As a result of the reported net losses for the three months         ended September 30, 2001 and 2000, and the pro forma net loss         for the three months ended September 30, 2001, approximately         101, 181, and 101, respectively, of potentially dilutive         securities (in millions) have not been included in the         calculation of diluted loss per common share for the periods         presented because to do so would have been anti-dilutive.     (4) Excludes the impact oafter-tax charges associated with         discontinued operations, Acquisition Related Costs (in-process         research and development expense and the amortization of         acquired technology and goodwill from all acquisitions         subsequent to July 1998), stock option compensation from         acquisitions and divestitures, and, where applicable, certain         of the one-time gains and charges.     A   - Excludes a total of $1,642 pre-tax ($1,286 after-tax)         associated with Acquisition Related Costs, stock option         compensation from acquisitions and divestitures, and one-time         gains and charges. Acquisition Related Costs of $631 pre-tax         ($558 after-tax) were primarily associated with the         acquisitions of Bay Networks, Inc., Xros, Inc., Alteon         WebSystems, Inc., and Clarify Inc. Stock option compensation         from acquisitions and divestitures was $32. One-time gains         were $45 pre-tax ($21 after-tax) and one-time charges were         $1,024 pre-tax ($717 after-tax).     B   - Excludes a total of $1,222 pre-tax ($1,183 after-tax) for         discontinued operations, Acquisition Related Costs, stock         option compensation from acquisitions and divestitures, and         one-time gains.                 NORTEL NETWORKS CORPORATION U.S. GAAP                  Consolidated Results (unaudited) (1)          (millions of U.S. dollars, except per share amounts)                                                                  Pro                                                                 forma                                  For the nine months ended         %                          09/30/01  09/30/00  09/30/01  09/30/00 Change                         ---------- --------  --------- -------- ------                          Reported  Reported Pro forma Pro forma                                                  A         B Revenues                  $14,055   $19,750   $14,055  $19,750  (29%) Cost of revenues           11,750    10,898    11,750   10,896    8%                          --------   -------   -------- ------- Gross profit                2,305     8,852     2,305    8,854  (74%) Selling, general and  administrative expense     4,902     3,847     4,902    3,847   27% Research and development  expense                    2,661     2,616     2,661    2,616    2% In-process research and  development expense           15     1,012        --       -- Amortization of  intangibles   Acquired technology         744       602        --       --   Goodwill                  3,685     2,244        25       38 Stock option compensation  from acquisitions and  divestitures                  91        98        --       -- Special charges            14,949       195        --       -- Gain on sale of  businesses                   (45)     (174)       --       --                          --------   -------   -------- -------                           (24,697)   (1,588)   (5,283)   2,353 Equity in net loss of  associated companies        (138)      (22)      (19)      (7) Other income - net           (268)      775      (268)      93 Interest expense Long-term debt               (138)      (69)     (138)     (69) Other                         (82)      (49)      (82)     (49)                          --------   -------   -------- ------- Earnings (loss) before  income taxes             (25,323)     (953)   (5,790)   2,321  (349%) Income tax recovery  (provision)                2,842      (853)    1,784     (750)                          --------   -------   -------- ------- Net earnings (loss) from  continuing operations    (22,481)   (1,806)   (4,006)   1,571 Net loss from  discontinued operations  (net of taxes)(2)         (3,010)     (255)       --       --                          --------   -------   -------- ------- Net earnings (loss)  before accounting change (25,491)   (2,061)   (4,006)   1,571 Cumulative effect of  accounting change (net  of taxes of $9) (3)           15        --        --       --                          --------   -------   -------- ------- Net earnings (loss)      $(25,476)  $(2,061)  $(4,006)  $1,571  (355%)                          ========   =======   ======== ======= Basic earnings (loss) per  common share: From continuing  operations               $ (7.07)  $ (0.62)  $ (1.26)  $ 0.54 From discontinued  operations                 (0.94)    (0.09)      N/A      N/A                          --------   -------   -------- -------                           $ (8.01)  $ (0.71)  $ (1.26)  $ 0.54  (333%)                          ========   =======   ======== ======= Diluted earnings (loss)  per common share (4) From continuing  operations               $ (7.07)  $ (0.62)  $ (1.26)  $ 0.51 From discontinued  operations                 (0.94)    (0.09)      N/A      N/A                          --------   -------   -------- -------      $ (8.01)  $ (0.71)  $ (1.26)  $ 0.51  (347%)                          ========   =======   ======== ======= Dividends declared per  common share            $0.03750  $0.05625  $0.03750 $0.05625 Effective tax rate (5)        N/A       N/A     30.9%    32.0% Weighted average number  of common shares  outstanding (millions)          - basic            3,181     2,907     3,181    2,907          - diluted (4)      3,181     2,907     3,181    3,069     (1) These unaudited consolidated results for the nine months ended         September 30, 2001 are preliminary and are subject to change.         Nortel Networks disclaims any intention or obligation to         update or revise these preliminary results prior to the filing         of its reported results for the three months ended September         30, 2001.     (2) Reported results for the nine months ended September 30, 2001         and 2000 are net of applicable income tax recoveries of $723         and $46, respectively.     (3) Impact of the adoption of Statement of Financial Accounting         Standards ("SFAS") No. 133, "Accounting for Derivative         Instruments and Hedging Activities", and the corresponding         amendments under SFAS No. 138, "Accounting for Certain         Derivative Instruments and Certain Hedging Activities" ("SFAS         133"). The adoption of SFAS 133 did not affect either basic or         diluted earnings (loss) per common share after giving effect         to the accounting change.     (4) As a result of the reported net losses for the nine months         ended September 30, 2001 and 2000, and the pro forma net loss         for the nine months ended September 30, 2001, approximately         71, 162, and 71, respectively, of potentially dilutive         securities (in millions) have not been included in the         calculation of diluted loss per common share for the periods         presented because to do so would have been anti-dilutive.     (5) Excludes the impact of after-tax charges associated with         discontinued operations, Acquisition Related Costs (in-process         research and development expense and the amortization of         acquired technology and goodwill from all acquisitions         subsequent to July 1998), stock option compensation from         acquisitions and divestitures, and where applicable, certain         of the one-time gains and charges.     A   - Excludes a total of $23,242 pre-tax ($21,470 after-tax)         associated with discontinued operations, Acquisition Related         Costs, stock option compensation from acquisitions and         divestitures, and one-time gains and charges. The loss from         discontinued operations was $3,733 pre-tax ($3,010 afelatedx).         Acquisition Related Costs of $4,433 pre-tax ($4,164 after-tax)         were primarily associated with the acquisitions of Bay         Networks, Inc., Alteon WebSystems, Inc., Xros, Inc., Qtera         Corporation, Clarify Inc., and the 980 nanometer pump-laser         chip business. Stock option compensation from acquisitions and         divestitures was $91. Cumulative effect of accounting change         was a $24 pre-tax ($15 after-tax) gain. One-time gains were         $45 pre-tax ($21 after-tax) and one-time charges were $15,054         pre-tax ($14,241 after-tax), primarily related to the write         down of intangible assets of $12,486 pre-tax ($12,400         after-tax) and restructuring costs of $2,463 pre-tax ($1,748         after-tax). The write down of intangible assets primarily r     B   - Excludes a total of $3,575 pre-tax ($3,632 after-tax)         associated with discontinued operations, Acquisition Related         Costs, stock option compensation from acquisitions and         divestitures, and one-time gains and charges. The comparative financial statements results and financial results up to May 1, 2000 represent the financial results of Nortel Networks Limited, formerly known as Nortel Networks Corporation.                  NORTEL NETWORKS CORPORATION U.S. GAAP                     Consolidated Balance Sheets (1)                       (millions of U.S. dollars)                                        (unaudited)(unaudited)(audited)                                         Sept. 30,   June 30, Dec. 31,                                           2001       2001     2000 (2)                                        ----------  --------- --------- ASSETS Current assets Cash and cash equivalents                  $3,355    $1,929    $1,644 Accounts receivable (less provisions of -  $684 at September 30, 2001; $528 at  June 30, 2001;  $363 at  December 31, 2000)                         3,859     5,587     7,275 Inventories                                 1,991     2,633     3,827 Income taxes recoverable                      667       576        -- Deferred income taxes - net                 1,286       505       644 Other current asets                          997     1,118     1,618 Current assets of discontinued operations   1,284     1,340     1,522                                           -------   -------   ------- Total current assets                       13,439    13,688    16,530 Long-term receivables (less provisions of  - $968 at September 30, 2001; $545 at  June 30, 2001; $383 at December 31, 2000)    549       855     1,117 Investments at cost and associated  companies at equity                          237       464       773 Plant and equipment - net                   2,804     3,387     3,357 Intangible assets - net                     4,023     4,685    17,958 Deferred income taxes - net                 1,512     1,109       283 Other assets                                  865       922       556 Long-term assets of discontinued  operations                                   412       393     1,606                                           -------   -------   ------- Total assets                              $23,841   $25,503   $42,180                                           =======   =======   ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable                                $647    $1,731      $315 Trade and other accounts payable            1,923     2,042     3,005 Payroll and benefit-related liabilities       823       704       916 Other accrued liabilities                   5,586     4,531     3,885 Income taxes payable                           --        --       306 Long-term debt due within one year             39        79       445 Current liabilities of discontinued  operations                                 1,257     1,422       186                                           -------   -------   ------- Total current liabilities                  10,275    10,509     9,058 Deferred income                               120       129        93 Long-term debt                              4,437     2,618     1,178 Deferred income taxes - net                   626       489       874 Other liabilities                           1,099     1,022     1,024 Minority interest in subsidiary companies     610       728       770 Long-term liabilities of discontinued  operations                                    12        20        74                                           -------   -------   -------                                            17,179    15,515    13,071                                           -------   -------   ------- SHAREHOLDERS' EQUITY Common shares, without par value -  Authorized shares: unlimited; Issued and  outstanding shares: 3,209,016,631 at  September 30, 2001, 3,197,161,690 at  June 30, 2001, and  3,095,772,260 at  December 31, 2000                         32,801    32,626    29,141 Additional paid-in capital                  3,372     3,402     3,636 Deferred stock option compensation           (260)     (329)     (413) Deficit                                   (28,325)  (24,857)   (2,726) Accumulated other comprehensive loss         (926)     (854)     (529)                                           -------   -------   ------- Total shareholders' equity                  6,662     9,988    29,109                                           -------   -------   ------- Total liabilities and shareholders'  equity                                   $23,841   $25,503   $42,180                                           =======   =======   =======     (1) The unaudited consolidated balance sheet as at September 30,         2001 is preliminary and is subject to change. Nortel Networks         disclaims any intention or obligation to update or revise such         balance sheet prior to the filing of its reported results for         the three months ended September 30, 2001.     (2) Restated for discontinued operations.                       NORTEL NETWORKS CORPORATION                  Consolidated Results (unaudited) (1)                        Supplementary Information                       (millions of U.S. dollars) Revenues from continuing operations         Three months ended               Nine months ended                        September 30,                   September 30,                    -------------------             -------------------  By Segments:(2)     2001    2000  % Change   2001     2000   % Change                    -------  ------  -------   -----   -----   --------  Network   Infrastructure   $ 2,802  $ 5,360   (48%)  $10,917   $ 15,849  (31%)  Photonics   Components            45      674   (93%)      477      1,611  (70%)  Other                 864    1,224   (29%)    2,951      3,575  (17%)  Intersegment   adjustment           (17)    (532)            (290)    (1,285)                    -------- --------         -------- ----------  Total               3,694    6,726           14,055     19,750                    ======== ========         ======== ==========Three months ended         Nine months ended                       September 30,             September 30,                    -----------------         -------------------  By Customer  Solutions:(2)      2001     2000   % Change    2001     2000 % Change                    -------  ------  -------   -----   -----    -------  Optical inter-city  $ 350  $ 1,577   (78%)  $ 1,635    $ 4,800  (66%)  Local internet      1,198    2,413   (50%)    5,041      7,349  (31%)  Wireless internet   1,254    1,370   (8%)     4,241      3,700   15%  Other (3)             892    1,366   (35%)    3,138      3,901  (20%)                    -------- --------         -------- ----------  Total               3,694    6,726           14,055     19,750                    ======== ========         ======== ==========                    Three months ended        Nine months ended                      September 30,             September 30,                    -----------------         -------------------  By Geographic  Regions:(4)        2001      2000 % Change    2001    2000   % Change                    -------  ------  -------   -----    -----   -------  United States     $ 1,761  $ 3,826   (54%)  $ 6,850     11,994  (43%)  Canada                183      389   (53%)      699      1,030  (32%)  Other countries     1,750    2,511   (30%)    6,506      6,726  (3%)                    -------- --------         -------- ----------  Total               3,694    6,726           14,055     19,750                    ======== ========         ======== ==========     (1) These unaudited consolidated results for the three months and         nine months ended September 30, 2001 are preliminary and are         subject to change. Nortel Networks disclaims any intention or         obligation to update or revise these preliminary results prior         to the filing of its reported results for the three months         ended September 30, 2001.     (2) In response to the continued evolution of Nortel Networks         customers, markets and solutions, Nortel Networks changed the         way it manages its business to reflect a focus on providing         seamless networking solutions and service capabilities to its         customers. As a result, financial information by segment and         customer solution has been restated and reported on a new         basis commencing with the three months ended March 31, 2001.     (3) Other includes the external customer solutions revenues of $28         and $142 of the Photonics Components segment for the three         months ended September 30, 2001 and 2000, respectively, and         $187 and $326 for the nine months ended September 30, 2001 and         2000, respectively.     (4) Revenues are attributable to geographic regions based on the         location of the customer. The comparative financial statements results and financial results up to May 1, 2000 represent the financial results of Nortel Networks Limited, formerly known as Nortel Networks Corporation.    CONTACT:          Nortel Networks                   Investors: 888/901-7286 or 905/863-6049                   investor@nortelnetworks.com                   or                   Business media:                   David Chamberlin, 972/685-4648                   ddchamb@nortelnetworks.com URL:              http://www.businesswire.com  	
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