Nortel Provides Status and Outlook Update

Toronto (ots/PRNewswire) - Nortel Networks(x) Corporation (NYSE:
NT; TSX: NT) and its principal operating subsidiary, Nortel Networks
Limited ("NNL"), today provided a status update pursuant to the
alternate information guidelines of the Ontario Securities
Commission ("OSC"). These guidelines contemplate that the Company
and NNL will normally provide bi-weekly updates on their affairs
until such time as they are current with their filing obligations
under Canadian securities laws.

Outlook (a)

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Commenting on the Company's financial expectations, Peter Currie,
executive vice president and chief financial officer, Nortel, said,
"We expect strong revenue momentum for the rest of 2006, resulting
in high single digit growth for the full year 2006 compared to 2005.
For the full year, we expect gross margin to be around 40% as a
percentage of revenue and operating expenses to be flat to up
slightly from 2005, with foreign exchange and growth related
expenses off-setting productivity and efficiencies. For the first
quarter of 2006, we expect revenues to be flat to down slightly and
a slightly higher loss compared to the first quarter of 2005."

The Company continues to expect to file its and NNL's first
quarter 2006 Quarterly Reports on Form 10-Q, and the corresponding
filings under Canadian securities laws, no later than the week of
June 5, 2006. As previously announced, the Company will hold a
teleconference/audio webcast today at 8:30 a.m. ET to discuss this
release and provide a business update. Details of the call are set
out below. (a) The Company's financial outlook contains
forward-looking information and, as such, is based on certain
assumptions, and is subject to important risks 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.

The Company and NNL reported that there have been no material
developments in the matters reported in the March 10, 2006 press
release and their status updates of March 23, April 6, April 20 and
May 4, 2006, except for the Company's press releases "Flextronics,
Nortel Complete Transfer of Calgary Manufacturing Operations and
Related Assets" and "Nortel Announces Waivers and Amendments under
Credit and Support Facilities", each dated May 9, 2006, and the
matters described above.

The Company's and NNL's next bi-weekly status update is expected
to be released during the week of May 29, 2006.

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", "plans", "envisions", "seeks" and other similar
language and are considered forward-looking statements or
information under applicable securities legislation. These
statements are based on Nortel's current expectations, estimates,
forecasts and projections about the operating environment, economies
and markets in which Nortel operates. These statements are subject
to important assumptions, risks and uncertainties, which are
difficult to predict and the actual outcome may be materially
different. Nortel has made various assumptions in the preparation of
its financial outlook in this press release, including the following
company specific assumptions: no further negative impact to Nortel's
results of operations, financial condition and liquidity arising
from Nortel's restatements of its financial results; Nortel's prices
increasing at or above the rate of price increases for similar
products in geographic regions in which Nortel sells its products;
increase in sales to Nortel's enterprise customers and wireless
service provider customers in the Asia Pacific region as a result of
Nortel's joint venture with LG Electronics Inc.; anticipated growth
in sales to enterprise customers, including the full year impact to
Nortel's revenues from its acquisition of PEC Solutions, Inc., (now
Nortel Government Solutions Incorporated); improvement in Nortel's
product costs due to favorable supplier pricing substantially offset
by higher costs associated with initial customer deployments in
emerging markets; cost reductions resulting from the completion of
Nortel's significant financial restatement exercise related to its
restatements and 2004 restructuring plan; a moderate increase in
costs over 2005 related to investments in the finance organization
and remedial measures related to Nortel's material weaknesses in
internal controls; increased employee costs relative to expected
cost of living adjustments and employee bonuses offset by a
significant reduction in executive recruitment and severance costs
incurred in 2005; and the effective execution of Nortel's strategy.
Nortel has also made certain macroeconomic and general industry
assumptions in the preparation of its financial guidance including:
a modest growth rate in the gross domestic product of global
economies in the range of 3.2% which is unchanged from the growth
rate in 2005; global service provider capital expenditures in 2006
reflecting flat to low single digit growth as compared to low double
digit growth in 2005; a general increase in demand for broadband
access, data traffic and wireless infrastructure and services in
emerging markets with the rate of growth in developed markets
beginning to slow; and a moderate impact as a result of expected
industry consolidation among service providers in various geographic
regions, particularly in North America and EMEA. The above
assumptions, although considered reasonable by Nortel at the date of
this press release, may prove to be inaccurate and consequently
Nortel's actual results could differ materially from its
expectations set out in this press release.

Further, actual results or events could differ materially from
those contemplated in forward-looking statements as a result of the
following (i) risks and uncertainties relating to Nortel's
restatements and related matters including: Nortel's most recent
restatement and two previous restatements of its financial
statements and related events; the negative impact on Nortel and NNL
of their most recent restatement and delay in filing their financial
statements and related periodic reports (including the anticipated
delay in filing the Quarterly Reports on Form 10-Q for the first
quarter of 2006) 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; 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 July 15, 2006 for the First Quarter 2006 Form 10-Qs, 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 the market price of its publicly traded
securities arising from any decline in its gross margin, or
fluctuations in foreign currency exchange rates; any negative
developments associated with Nortel's supply contract and contract
manufacturing agreements including as a result of using a sole
supplier for key optical networking solutions components, and any
defects or errors in Nortel's current or planned products; any
negative impact to Nortel of its failure to achieve its business
transformation objectives; additional valuation allowances for all
or a portion of its deferred tax assets; Nortel's failure to protect
its intellectual property rights, or any adverse judgments or
settlements arising out of disputes regarding intellectual property;
changes in regulation of the Internet and/or other aspects of the
industry; Nortel's failure to successfully operate or integrate its
strategic acquisitions, or failure to consummate or succeed with its
strategic alliances; any negative effect of Nortel's failure to
evolve adequately its financial and managerial control and reporting
systems and processes, manage and grow its business, or create an
effective risk management strategy; and (iii) risks and
uncertainties relating to Nortel's liquidity, financing arrangements
and capital including: the impact of Nortel's most recent
restatement and two previous restatements of its financial
statements; any 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 effect to Nortel of the need to make larger
defined benefit plans contributions in the future or exposure to
customer credit risks or inability of customers to fulfill payment
obligations under customer financing arrangements; any negative
impact on Nortel's ability to make future acquisitions, raise
capital, issue debt and retain employees arising from stock price
volatility and further declines in the market price of Nortel's
publicly traded securities, or any future share consolidation
resulting in a lower total market capitalization or adverse effect
on the liquidity of Nortel's common shares. For additional
information with respect to certain of these and other factors, see
Nortel's Annual Report on Form 10-K/A 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.

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

Nortel will host a teleconference/audio webcast to present a
Business Update.

TIME: 8:30 AM - 9:30 AM ET on Tuesday, May 16, 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 www.nortel.com/businessupdate
International: +1-212-271-4505
Replay:
(Available one hour after the conference)
North America : 1-800-383-0935
Passcode : 21291478 followed by the number sign
International : +1-402-530-5545
Passcode : 21291478 followed by the number sign
Webcast: www.nortel.com/businessupdate

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

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