Nortel Drops Revenue Guidance

Nortel gives status update; expects revenues in 3Q to be lower than previous guidance

September 16, 2004

2 Min Read

TORONTO -- Nortel Networks* Corporation [NYSE/TSX: NT] and its principal operating subsidiary, Nortel Networks Limited (“NNL”), provided a status update pursuant to the alternative information guidelines of the Ontario Securities Commission. 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.

The Company and NNL reported that there have been no material developments in the matters reported in their status updates of June 2, 2004, June 29, 2004, July 13, 2004, July 27, 2004, August 10, 2004, August 19, 2004 and September 2, 2004 with the exception of the matters described below.

Business Outlook

The Company expects its revenues in the third quarter of 2004 to be lower than the Company’s previously announced preliminary unaudited revenues for the second quarter of 2004. On a full year basis, the Company now expects that its 2004 revenue percentage growth over 2003 will be in the mid single digits and that the overall communications equipment market will grow faster than that.

Bill Owens, president and chief executive officer, Nortel Networks, said, “As we work through this challenging transition period, completing our restatement activity and implementing the new strategic plan for the Company, I am confident that Nortel Networks will be positioned to compete strongly in all of our markets with the right products and services as we move into 2005.”

Status of Civil Proceedings

As previously announced, on June 30, 2004 the United States District Court in the Southern District of New York signed Orders which consolidated the 27 class action complaints that had been filed against Nortel Networks, and certain former officers, in the Southern District of New York and appointed lead counsel and lead plaintiffs in respect of the consolidated action. On September 10, 2004, a consolidated class action complaint was filed alleging that the named defendants (Nortel Networks, certain current directors and certain former officers) violated U.S. securities laws, including by making materially false and misleading statements.

Nortel Networks Ltd.

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