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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 Date of Report
(date of earliest event reported)
June 29, 2004 Nortel Networks Limited (Exact name of registrant as specified in its charter)
 CANADA
    
    000-30758
    
    62-12-62580(State or other jurisdiction
of incorporation)
    
    (Commission
File Number)
    
    (IRS Employer
Identification No.)
 8200 Dixie Road, Suite 100, Brampton, Ontario, Canada
    
    L6T 5P6(address
of principal executive offices)
    
    (Zip code)
 Registrants telephone number, including area code (905) 863-0000.




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Item 5.    Other Events On June 29, 2004, Nortel
Networks Corporation announced that it had reached an agreement with
Flextronics regarding the divestiture of certain Nortel Networks
manufacturing operations and related activities in Canada and Brazil.
It also anticipated that Flextronics will acquire Nortel Networks manufacturing
operations in France and Northern Ireland, subject to the completion of the
required information and consultation process. These operations and activities
have been the subject of discussions between the two companies since Nortel
Networks announced in January 2004 that it was in discussions with Flextronics. Under the terms of the agreement, Flextronics will acquire substantially all of
Nortel Networks remaining manufacturing operations, including product
integration, testing and repair operations carried out in the Nortel Networks
Systems Houses in Calgary and Montreal (Canada) and Campinas
(Brazil), and will also acquire certain activities related to these locations, including
the management of the supply chain, related suppliers and third-party
logistics. In Europe, Flextronics has made an offer to purchase similar
operations at the Nortel Networks Monkstown (Northern Ireland) and Chateaudun
(France) Systems Houses, and, as required by law, this offer will be subject to
completion of appropriate information and consultation processes with the
relevant employee representatives. Under the terms of the agreement and offer, Flextronics would also acquire
Nortel Networks global repair services, as well as certain design assets in
Ottawa and Monkstown related to hardware and embedded software design, and
related product verification for certain established optical products. These
design assets are being coupled with the manufacturing operations that are
being divested so as to enable faster product cost reduction and improved
time-to-market for new features that further leverage the lifecycle of these
successful established optical products. This, in turn, will enable Nortel
Networks to focus on next generation optical architectures, products and
solutions  areas where Nortel Networks believes it can gain the most
competitive advantage. Upon the successful completion of the agreement and offer, Nortel Networks
expects to realize even further benefits from its divestiture strategy,
including:  
    
    moving towards a 100-percent variable cost structure for manufacturing, which leads all of Nortel Networks major
competitors and which will provide even greater operational and financial agility;
    
    estimated proceeds of approximately US$675-US$725 million in cash payments to be received in the fourth quarter of 2004 and
during 2005 which is comprised of approximately US$475-US$525 million for inventory and equipment, dependent on the asset
value at closing, and US$200 million for intangible assets relating to the design and engineering transfer. These cash
payments would be offset by related estimated transaction costs (including transition, potential severance, information
technology implementation and real estate costs) of approximately US$200 million;
    
    an increase in inventory management efficiency moving toward best in class; and
    
    by year four, targeting US$75-US$100 million positive impact on net earnings before tax on an annualized basis which
includes savings from related internal efficiencies expected to be realized. As part of todays announcement, both companies would also enter into a
four-year supply agreement for manufacturing services (whereby Flextronics will
manage approximately US$2.5 billion of Nortel Networks annual cost of sales)
and a three-year supply agreement for design services. In line with this direction, Nortel Networks also announced today that it will
create Solutions Operations Centers in Calgary and Montreal and, pending the
completion of information and consultation processes in Europe, in Monkstown
and Chateaudun. These Centers will have overall responsibility for the
strategic management and control of Nortel Networks various supply chains,
including all customer interfaces, customer service, order management, quality
assurance, product cost management, new product introduction, and network
solutions integration, testing and fulfillment. Under the terms announced today, it is also intended that approximately 2,500
employees would transfer to Flextronics. Of those employees, approximately 900
in Montreal, 650 in Calgary, 100 in Ottawa and 30 in Campinas will transfer to
Flextronics. Under the terms proposed in Europe, approximately 440 in Monkstown
(including approximately 55 designers) and 330 in France would transfer. The portion of the transaction related to the manufacturing activities in
Montreal and the optical design activities in Ottawa and Monkstown is expected
to close in the fourth quarter of 2004. The balance of the transaction is
expected to close on separate dates occurring during the first half of 2005. The aggregate cash
proceeds to Nortel Networks noted above
will be allocated to each separate closing and, with respect to each
closing, will be paid on an instalment basis up to nine months
thereafter. Such payments will be subject to a number of adjustments,
including from potential post-closing date asset valuations and
potential post-closing indemnity payments. Flextronics also has the ability in
certain cases to exercise rights to put, or sell back, to Nortel Networks certain
inventory and equipment after the expiration of a specified period
(of up to fifteen months) following each respective closing date.
Nortel Networks does not expect such rights to be exercised with
respect to any material amount of inventory and/or equipment. The
discussions and closing date expectations are subject to the completion of the
required information and consultation processes. All transactions are also
subject to customary conditions and regulatory approvals. Nortel Networks Corporation owns all of the Registrants common shares and the
Registrant is Nortel Networks Corporations principal direct operating
subsidiary. Nortel Networks is an industry leader and innovator focused on transforming how
the world communicates and exchanges information. The Company is supplying its
service provider and enterprise customers with communications technology and
infrastructure to enable value-added IP data, voice and multimedia services
spanning Wireless Networks, Wireline Networks, Enterprise Networks, and Optical
Networks. As a global company, Nortel Networks does business in more than 150
countries. Certain information
included in this report 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 outcome of Nortel Networks independent review
and planned restatement of its previously announced or filed financial results;
the impact of the management changes announced on April 28, 2004; the impact of
the inability to meet Nortel Networks filing obligations on support facilities
and public debt obligations; the risk that the transaction with
Flextronics described in this report may not be completed on the
expected schedule or at all; adjustments to expected proceeds from
the transaction with Flextronics resulting from post-closing asset
valuations and post-closing indemnity payments; the ability of
Flextronics to exercise certain contractual put rights with respect
to certain inventory and equipment; the sufficiency of Nortel Networks 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; continued reductions in spending by Nortel Networks customers;
fluctuations in Nortel Networks operating results and general industry,
economic and market conditions and growth rates; the communication by Nortel
Networks auditors of the existence of material weaknesses in internal control;
Nortel Networks ability to recruit and retain qualified employees; fluctuations
in Nortel Networks cash flow, level of outstanding debt and current debt
ratings; the use of cash collateral to support Nortel Networks normal course
business activities; the dependence on Nortel Networks subsidiaries for
funding; the impact of Nortel Networks defined benefit plans and deferred tax
assets on results of operations and Nortel Networks cash flows; Nortel Networks
dependence on new product development and its ability to predict market demand
for particular products; Nortel Networks ability to 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; barriers to 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; changes in regulation of the Internet; the impact
of the credit risks of Nortel Networks customers and the impact of customer
financing and commitments; stock market volatility generally and as a result of
acceleration of the settlement date or early settlement of Nortel Networks
purchase contracts; the impact of Nortel Networks supply and outsourcing
contracts that contain delivery and installation provisions, which, if not met,
could result in the payment of substantial penalties or liquidated damages; the
future success of Nortel Networks strategic alliances; and the adverse
resolution of litigation, investigations, intellectual property disputes and
similar matters. For additional information with respect to certain of these
and other factors, see the most recent Form 10 Q/A and Form 10-K/A filed by
Nortel Networks with the United States Securities and Exchange Commission.
Unless otherwise required by applicable securities laws, Nortel Networks
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized. NORTEL NETWORKS LIMITEDBy:
    
    /s/ Nicholas J. DeRomaNicholas J. DeRomaChief Legal OfficerBy:
    
    /s/ Blair F. MorrisonBlair F. MorrisonAssistant Secretary
 Dated: July 6, 2004