Consolidate plan

Nortel Networks announced that it now expects revenues from continuing operations in the third quarter of 2002 to be lower than second quarter 2002 revenues from continuing operations by approximately 15 percent. This compares to its previously stated guidance of expected sequentially lower revenues in the third quarter of 2002 of "up to approximately 10 percent." Further deterioration in spending by service providers, generally in the United States and for wireless networks in Asia, has resulted in the revised outlook.

Despite the current revenue outlook, the company continues to expect that the impact of its ongoing restructuring will result in a lower cost structure in the third quarter of 2002. Factoring the uncertainty about the timing of a meaningful recovery in the telecom market into its quarterly review procedures regarding the potential realization of the income tax assets on its balance sheet, the company at this time anticipates recognizing significantly lower than expected income taxes against its loss for the third quarter. As a result, the company expects a marginally larger pro forma net loss from continuing operations per share in the third quarter of 2002 compared to the second quarter of 2002.

The company also announced that it plans to present a proposal to its shareholders for a consolidation of its outstanding common shares (also known as a "reverse stock split") at its annual meeting planned for spring 2003. The consolidation ratio will be set by the company's Board of Directors in early 2003 at a level which would be expected at that time to result in an initial post-consolidation common share price in the range of US$10 to US$20, assuming receipt of shareholder and regulatory approvals.