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.

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

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)
-------------------------------- ---------------------
-------------------------------- ---------------------

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
------------- ------------ -------------
------------- ------------ -------------

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
-------------------------------- ---------------------
-------------------------------- ---------------------

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
-------------------------------- ---------------------
-------------------------------- ---------------------

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
----------------------------------
----------------------------------

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.de

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