##### 



Exhibit 99.1

News Release

(NORTEL NETWORKS LOGO)

www.nortelnetworks.com

January 29, 2004

For more information:

|                            |  |                            
|--------------------------- |  | ---------------------------
|Investors:                  |  | Media:                     
|888-901-7286                |  | Tina Warren                
|905-863-6049                |  | 905-863-4702               
|investor@nortelnetworks.com |  | tinawarr@nortelnetworks.com

Nortel Networks Reports Results for the Fourth Quarter and Year 2003



| |  | Q4 2003 revenues of US$2.83 billion, up 12 percent compared to the fourth quarter of 2002, and up sequentially 25 percent
|- |  | -------------------------------------------------------------------------------------------------------------------------
| 
| |  | Q4 2003 net earnings of US$499 million, US$0.11 per common share on a diluted basis                                      
| 
| |  | Strong cash balance of US$4.0 billion, up sequentially US$428 million                                                    

TORONTO  Nortel Networks* Corporation [NYSE/TSX: NT] today reported unaudited
results for the fourth quarter and the year 2003 prepared in accordance with
United States generally accepted accounting principles.

Fourth Quarter 2003 Results

Revenues were US$2.83 billion for the fourth quarter of 2003 compared to
US$2.53 billion for the fourth quarter of 2002 and US$2.27 billion for the
third quarter of 2003. Nortel Networks reported net earnings in the fourth
quarter of 2003 of US$499 million, or US$0.11 per common share on a diluted
basis, compared to a net loss of US$168 million, or US$0.04 per common share,
in the fourth quarter of 2002 and net earnings of US$185 million, or US$0.04
per common share on a diluted basis, in the third quarter of 2003.

Net earnings in the fourth quarter of 2003 included US$109 million of net
earnings from discontinued operations  net of tax; charges of US$14 million
for deferred stock option compensation associated with acquisitions; and US$9
million of special charges related to restructuring activities. The Companys





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results also reflected a net tax benefit of US$37 million which included a net
benefit of US$41 million associated with tax audits and settlements.

Commenting on Nortel Networks financial performance, Frank Dunn, president and
chief executive officer, Nortel Networks, said, With the challenges that we
faced in 2003, the Company had a tremendous year, truly marking a turning point
for Nortel Networks. I am extremely proud of the dedication, passion and
commitment of the entire employee team that delivered the performance not only
in the fourth quarter, but throughout the year.

Some highlights of Nortel Networks recent market successes include:

Wireless Data



| |  | Strategic Universal Mobile Telecommunications System (UMTS) contract win with Partner
Communications (a Hutchison property) to build what is expected to be Israels first third
generation UMTS wireless network;                                                                                                                                                                            
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Trial of a breakthrough WLAN (Wireless Local Area Network) architecture with MIT
(Massachusetts Institute of Technology) and plans for a jointly proposed trial with BT
(British Telecom) and one of its leading customers, to drive significantly reduced service
provider costs for transport of high-speed wireless data from Wi-Fi (Wireless Fidelity)
networks to wired broadband networks;
| 
| |  | Global System for Mobile communications (GSM) momentum in Asia, with a contract win to
expand the capacity of Pak Telecom Mobile Limiteds Ufone 900 digital wireless network, as
well as a deployment with China Mobile to expand and upgrade its GSM network;                                                                                                                               

Voice over Packet



| |  | Selection by Verizon to be its supplier to build the largest U.S. converged, packet-switched
wireline network using Voice over Internet Protocol (Voice over IP) technology. The
network is expected to offer one of the industrys most comprehensive suites of Voice over
IP and multimedia services, providing consumers and businesses with communications
capabilities that dramatically increase functionality, mobility and productivity;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Further momentum in converged packet networks using Voice over IP technology for Class 5
applications, with contract wins with Dacom (Korea) and Chunghwa Telecom (Taiwan) for
multimedia services, and with CODETEL (Dominican Republic) and Cable & Wireless (Cayman
Islands) for Voice over IP access technology, including Internet Protocol (IP) enabled
Succession* Media Gateway 9000 deployments;                                       





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Page 3



| |  | Momentum in the deployment of enterprise IP Telephony solutions, with Inbal Insurance
(Jerusalem) and the Sheraton New York Hotel & Towers marking Nortel Networks 50 millionth
enterprise telephony line deployment;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Extended ties with BellSouth with a contract to supply IP Telephony solutions to small and
medium-sized businesses and branch offices with voice and data convergence packages;                                      

Multimedia Services and Applications



| |  | As part of Nortel Networks Secure Mobility initiative, announcement of an industry leading Virtual Private
Network (VPN) gateway to support IPSec (Internet Protocol Security) and SSL (Secure Socket Layer) remote
access, and a VPN secure mobility solution deployment by Unidad Editorial, Spains second largest newspaper
by circulation;                                                                                                                                     
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Deployments of Nortel Networks Enterprise Network and Service Management (ENSM) suite to enable real-time
network services like IP Telephony and video by Southern Company (one of the largest electric utilities in
the U.S.) to manage its network for power grid control and provide IP Telephony and advanced customer
service applications, and by Manchester City Council (one of the largest metropolitan districts in the U.K.)
to simplify and centralize network management;
| 
| |  | Multimedia Communication Server (MCS) 5100, a Session Initiation Protocol (SIP)-based IP PBX, won the
Network World Blue Ribbon award for its high grade collaboration features, including videoconferencing,
instant messaging, white boarding and web co-browsing, as well as network management and security;                                                                                                                                                                      

Broadband Networking



| |  | Announcement of a two year frame agreement under which Bell Canada plans to invest CDN$170 million in Nortel
Networks optical technology, such as the Optical Multiservice Edge platform and the OPTera* HDX optical
switch, to enhance Bell Canadas ability to deliver hosted IP Telephony and multimedia services; and an
announcement of a joint Optical Innovation Center that will accelerate the deployment of new IP-oriented
optical solutions;
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Strong momentum with metro optical C/DWDM (Coarse or Dense Wavelength Division Multiplexing) solutions, with
deployments of the OPTera* 5000 line of products by cable operators such as Mediacom and Lightpath, and
enterprises, such as CGI Group and ENMAX Envision and contract wins with voice carriers such as T-Com (fixed
network division of Deutsche Telekom);                                                                                





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Page 4



| |  | Success in the utility sector, with deployments of the OPTera* 3000 line of metro optical next-generation
SONET (Synchronous Optical Network) solutions by the Vermont Electric Power Company and L.A. Department of
Water and Power;                                                                          
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Continued traction with Optical Ethernet solutions, with deployments of the OPTera* 1000 series of products
by Golden Telecom (Russia) and cable telecom operator Retecal (Spain); and                                                                                                                         
| 
| |  | Launch of a three year strategic relationship with Avici Systems to integrate, sell and support Avicis
carrier-class core routers, allowing Nortel Networks to offer end-to-end networking solutions for carriers,
to help with seamless transition to Voice over IP and converged wireline/wireless networks.

Outlook

Commenting on the Companys outlook, Dunn said, As we enter 2004, we remain
committed to our business strategy of technology and solutions leadership in
helping our customers transform their networks and implement new applications
and services to drive improved productivity, reduced costs and revenue growth.
While we expect that the percentage growth in the overall capital spending by
our customers will be in the low single digits in 2004 compared to 2003, we
expect to grow faster than the market by leveraging our particular strengths in
Voice over IP and wireless data solutions.

For the first quarter of 2004, the Company expects a seasonal decline in
revenues compared to the fourth quarter of 2003.

Breakdown of Fourth Quarter 2003 Revenues

Revenues by segment

Compared to the fourth quarter of 2002,Wireless Networks revenues increased 33
percent, Enterprise Networks revenues decreased 2 percent, Wireline Networks
revenues increased 9 percent and Optical Networks revenues decreased 18
percent. Compared to the third quarter of 2003, Wireless Networks revenues
increased 35 percent, Enterprise Networks revenues increased 10 percent,
Wireline Networks revenues increased 26 percent and Optical Networks revenues
increased 16 percent.

Revenues by geographic region

Compared to the fourth quarter of 2002, the United States increased 26 percent,
Europe, Middle East and Africa region (EMEA) decreased 5 percent, Canada
increased 48 percent and Other decreased 12 percent. Compared to the third
quarter of 2003, the United States increased 38 percent, EMEA increased 11
percent, Canada increased 56 percent and Other decreased 2 percent.





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Page 5

Gross margin

Gross margin was 48 percent of sales in the fourth quarter of 2003, including a
benefit of approximately 1 percentage point from non-recurring purchase
discounts related to the finalization of the JDS Uniphase purchase arrangement.
Nortel Networks continues to expect its gross margin percentage to trend in the
mid 40s range over the near term.

Expenses

Selling, general and administrative (SG&A) expenses were US$482 million in
the fourth quarter of 2003, which included a benefit of US$37 million related
to a net reduction in provisions as a result of collections in the quarter of
certain trade and financed receivables. This compares to SG&A expenses of
US$473 million for the fourth quarter of 2002 and US$486 million for the third
quarter of 2003.

Research and development (R&D) expenses were US$523 million in the fourth
quarter of 2003, compared to US$498 million for the fourth quarter of 2002 and
US$485 million for the third quarter of 2003. The increased R&D expenses in the
quarter reflected additional program spending in wireless data solutions.

Other income (expense)
 net was US$97 million income for the fourth quarter
of 2003, which primarily related to interest and investment income of US$42
million (including US$17 million of mark to market investment gains), net
foreign exchange gains of US$18 million and a gain of US$17 million resulting
from the finalization of the valuations related to changes in ownership of
certain European operations.

Discontinued Operations

The Company reported net earnings from discontinued operations of US$109
million, which primarily reflected a gain in the amount of US$31 million from
the disposition of shares in Arris Group Inc., a collection of US$26 million of
previously deemed uncollectible receivables and a gain of US$18 million for the
sale of our fixed wireless access business.

Pension Related Matters

The Company recorded a non-cash charge in the fourth quarter of 2003 to
shareholders equity of US$374 million (US$318 million after-tax) related to
the minimum required recognizable deficit associated with the Companys pension
plans.





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Page 6

The Company expects its pension plans to have a deficit of approximately US$1.9
billion at December 31, 2003. In 2003, strong pension asset returns and cash
contributions were more than offset by the impact of declines in discount rates
and foreign exchange rates.

Cash

Cash balance at the end of the fourth quarter of 2003 was US$4.0 billion which
was up from US$3.6 billion at the end of the third quarter of 2003. This
increase in cash from the end of the third quarter was primarily driven by cash
from operations of US$264 million which included cash payments for
restructuring of US$106 million. In addition, Nortel Networks received US$73
million of net proceeds from discontinued operations resulting from the sale of
a minority investment and the collection of previously deemed uncollectible
receivables.

Year 2003 Results

For the year 2003, revenues were US$9.81 billion compared to US$10.57 billion
for the year 2002. Nortel Networks reported net earnings of US$732 million, or
US$0.17 per common share on a diluted basis for the year 2003, compared to a
net loss of US$3.27 billion, or US$0.85 per common share, for the year 2002.
The year 2003 results included US$353 million of net earnings from discontinued
operations  net of tax; US$189 million of special charges for restructuring;
and an aggregate of US$162 million for the amortization of acquired technology
and deferred stock option compensation associated with acquisitions.

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, Enterprise Networks, Wireline Networks, and Optical
Networks. As a global Company, Nortel Networks does business in more than 150
countries. This press release and more information about Nortel Networks can be
found on the Web at www.nortelnetworks.com.

Certain information included in this press release 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 sufficiency of our 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 our customers; fluctuations in operating
results and general industry, economic and market conditions and growth rates;
the communication by our auditors of the existence of material weaknesses in
internal control; the ability to recruit and retain qualified employees;
fluctuations in cash flow, the level of outstanding debt and our current debt
ratings; the ability to meet the financial covenant in our credit facilities;
the use of cash collateral to support our normal course business activities;
the dependence on our subsidiaries for funding; the impact of our defined
benefit plans and our deferred tax assets on our results of operations, cash
flows and compliance with our financial covenant; the dependence on new product
development and our ability to predict market demand for particular products;
the 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 our 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 our
purchase contracts; risks associated with a consolidation of our common shares;
the impact of 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 our
strategic alliances; and the adverse resolution of litigation, 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 and Form
10-K 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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Page 7

*Nortel Networks, the Nortel Networks logo, the Globemark, Business Without
Boundaries, Succession and OPTera are trademarks of Nortel Networks.

-end-

Nortel Networks will host a teleconference/audio webcast to discuss Q4 and Year
2003 Results.

TIME:   5:00 PM  6:00 PM ET on Thursday January 29, 2004

To participate, please call the following at least 15 minutes prior to the
start of the event.

|                                                                                       |  |                                       |  |                                      
|-------------------------------------------------------------------------------------- |  | ------------------------------------- |  | -------------------------------------
|Teleconference:                                                                        |  |                                       |  | Webcast:                             
|North America:                                                                         |  | 888-211-4395                          |  | www.nortelnetworks.com/q4earnings2003
|International:                                                                         |  | 212-231-6007                          |  |                                      
|                                                                                       |  |                                       |  |                                      
|Replay:
(Available one hour after the conference until 11:59 pm ET, February 13, 2004)
|North America:                                                                         |  | 800-383-0935                          |  | Passcode: 21177866#                  
|International:                                                                         |  | 402-530-5545                          |  | Passcode: 21177866#                  
|Webcast:                                                                               |  | www.nortelnetworks.com/q4earnings2003 |  |                                      





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NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
(millions of U.S. dollars, except per share amounts)

|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |       |       | 
|--------------------------------------------------------------------------------------------------------------------------------- | ------------------------------ | ------------ | ----- | ------------------ | ----- | ------------ | ----- | ------- | ----- | ---- | ----- | ---- | ----- | - | ------ | ----- | ----- | 
|                                                                                                                                  |                                |              |       | U.S. GAAP         
|                                                                                                                                  |                                |              |       |                   
|                                                                                                                                  |                                |              |       | Three months ended |       | Year ended  
|                                                                                                                                  |                                |              |       | December 31,       |       | December 31,
|                                                                                                                                  |                                |              |       |                    |       |             
|                                                                                                                                  |                                |              |       | 2003(1)            |       | 2002         |       | 2003(1) |       | 2002
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |     
|Revenues                                                                                                                          |                                | $            | 2,826 |                    |       | $            | 2,525 |         |       | $    | 9,807 |      |       | $ | 10,569 |      
|Cost of revenues(2)                                                                                                               |                                |              | 1,476 |                    |       |              | 1,496 |         |       |      | 5,193 |      |       |   | 6,798  |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Gross profit                                                                                                                      |                                |              | 1,350 |                    |       |              | 1,029 |         |       |      | 4,614 |      |       |   | 3,771  |      
|Selling, general and administrative expense(2)                                                                                    |                                |              | 482   |                    |       |              | 473   |         |       |      | 1,895 |      |       |   | 2,636  |      
|Research and development expense(2)                                                                                               |                                |              | 523   |                    |       |              | 498   |         |       |      | 1,993 |      |       |   | 2,208  |      
|Amortization of acquired technology                                                                                               |                                |              |      |                    |       |              | 35    |         |       |      | 98    |      |       |   | 157    |      
|Deferred stock option compensation                                                                                                |                                |              | 14    |                    |       |              | 22    |         |       |      | 64    |      |       |   | 87     |      
|Special charges                                                                                                                   |                                |              | 9     |                    |       |              | 178   |         |       |      | 189   |      |       |   | 2,173  |      
|Gain on sale of businesses                                                                                                        |                                |              |      |                    |       |              | (35   | )       |       |      | (28   | )    |       |   | (55    | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Operating earnings (loss)                                                                                                         |                                |              | 322   |                    |       |              | (142  | )       |       |      | 403   |      |       |   | (3,435 | )    
|Other income (expense)  net                                                                                                      |                                |              | 97    |                    |       |              | 36    |         |       |      | 224   |      |       |   | (9     | )    
|Interest expense                                                                                                                 
|
|                                                                                                                                  | Long-term debt                 |              |       | (42                | )     |              |       | (41     | )     |      |       | (176 | )     |   |        | (215  | )    
|                                                                                                                                  | Other                          |              |       |                   |       |              |       | (8      | )     |      |       | (10  | )     |   |        | (41   | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Earnings (loss) from continuing operations before income taxes, minority interests
and equity in net loss of associated companies |                                |              | 377   |                    |       |              | (155  | )       |       |      | 441   |      |       |   | (3,700 | )    
|Income tax benefit (expense)                                                                                                      |                                |              | 37    |                    |       |              | (8    | )       |       |      | 41    |      |       |   | 453    |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |                                |              | 414   |                    |       |              | (163  | )       |       |      | 482   |      |       |   | (3,247 | )    
|Minority interests  net of tax                                                                                                   |                                |              | (25   | )                  |       |              | (12   | )       |       |      | (61   | )    |       |   | (21    | )    
|Equity in net earnings (loss) of associated companies  net of tax                                                                |                                |              | 1     |                    |       |              | 8     |         |       |      | (34   | )    |       |   | (18    | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Net earnings (loss) from continuing operations                                                                                    |                                |              | 390   |                    |       |              | (167  | )       |       |      | 387   |      |       |   | (3,286 | )    
|Net earnings (loss) from discontinued operations  net of tax                                                                     |                                |              | 109   |                    |       |              | (1    | )       |       |      | 353   |      |       |   | 20     |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Net earnings (loss) before cumulative effect of accounting change  net of tax                                                    |                                |              | 499   |                    |       |              | (168  | )       |       |      | 740   |      |       |   | (3,266 | )    
|Cumulative effect of accounting change  net of tax                                                                               |                                |              |      |                    |       |              |      |         |       |      | (8    | )    |       |   |       |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Net earnings (loss)                                                                                                               |                                | $            | 499   |                    |       | $            | (168  | )       |       | $    | 732   |      |       | $ | (3,266 | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Basic earnings (loss) per common share(3)                                                                                         |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |  from continuing operations   |              | $     | 0.09               |       |              | $     | (0.04   | )     |      | $     | 0.09 |       |   | $      | (0.86 | )    
|                                                                                                                                  |  from discontinued operations |              | $     | 0.03               |       |              | $     |        |       |      | $     | 0.08 |       |   | $      | 0.01  |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Basic earnings (loss) per common share(3)                                                                                         |                                | $            | 0.12  |                    |       | $            | (0.04 | )       |       | $    | 0.17  |      |       | $ | (0.85  | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Diluted earnings (loss) per common share(4)                                                                                       |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |  from continuing operations   |              | $     | 0.09               |       |              | $     | (0.04   | )     |      | $     | 0.09 |       |   | $      | (0.86 | )    
|                                                                                                                                  |  from discontinued operations |              | $     | 0.02               |       |              | $     |        |       |      | $     | 0.08 |       |   | $      | 0.01  |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Diluted earnings (loss) per common share(4)                                                                                       |                                | $            | 0.11  |                    |       | $            | (0.04 | )       |       | $    | 0.17  |      |       | $ | (0.85  | )    
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|Weighted average number of common shares (millions)                                                                               |                                |              |       |                    |       |              |       |         |       |      |       |      |       |   |        |      
|                                                                                                                                  |                                |  basic(3)   |       |                    | 4,337 |              |       |         | 4,335 |      |       |      | 4,336 |   |        |       | 3,838 | 
|                                                                                                                                  |                                |  diluted(4) |       |                    | 4,356 |              |       |         | 4,335 |      |       |      | 4,343 |   |        |       | 3,838 | 



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|(1) |  | These unaudited consolidated results for the three months and year ended
December 31, 2003 are preliminary and are subject to change. Nortel
Networks disclaims any intention or obligation to update or revise these
preliminary results prior to the filing of its reported results for the
year ended December 31, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Effective January 1, 2003, Nortel Networks adopted prospectively the fair
value accounting for stock options. The stock option expense for the
three months and year ended December 31, 2003 was $7 and $26,
respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) |  | The basic weighted average number of common shares included the minimum
number of common shares to be issued upon settlement of the prepaid
forward purchase contracts issued on June 12, 2002. The minimum number of
common shares to be issued on a weighted basis for the three months ended
December 31, 2003 and 2002 were 214 and 485 (in millions), respectively.
The minimum number of common shares to be issued on a weighted basis for
the year ended December 31, 2003 and 2002 were 378 and 270 (in millions),
respectively.                                                                                                                                                                                                                                                                                                                                                              
|   
|(4) |  | As a result of the reported net losses from continuing operations for the
three months ended December 31, 2002, approximately 205 (in millions) of
potentially dilutive securities were not included in the calculation of
diluted loss per common share because to do so would have been
anti-dilutive. Also, as a result of the reported net losses from
continuing operations for the year ended December 31, 2002, approximately
195 (in millions) of potentially dilutive securities were not included in
the calculation of diluted loss per common share because to do so would
have been anti-dilutive. For the year ended December 31, 2003,
approximately 180 (in millions) of potentially dilutive securities related
to our $1,800 4.25 per cent convertible debt were not included in the
calculation of diluted earnings per common share because to do so would
have been anti-dilutive.





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##### 



NORTEL NETWORKS CORPORATION
Consolidated Balance Sheets (unaudited)
(millions of U.S. dollars)

|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------- | - | ------------ | ----- | ------------- | - | ------------ | ----- |  | - | ------- | ----- | 
|                                                                                                                                                                                                               |                                                                                                                              |   | U.S. GAAP   
|                                                                                                                                                                                                               |                                                                                                                              |   |             
|                                                                                                                                                                                                               |                                                                                                                              |   | December 31, |       | September 30, |   | December 31,
|                                                                                                                                                                                                               |                                                                                                                              |   | 2003(1)      |       | 2003          |   | 2002        
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |             
|ASSETS                                                                                                                                                                                                         |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|Current assets                                                                                                                                                                                                 |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|                                                                                                                                                                                                               | Cash and cash equivalents                                                                                                    |   | $            | 3,994 |               |   | $            | 3,566 |  |   | $       | 3,791 | 
|                                                                                                                                                                                                               | Restricted cash and cash equivalents                                                                                         |   |              | 63    |               |   |              | 113   |  |   |         | 249   | 
|                                                                                                                                                                                                               | Accounts receivable (less provisions of $256 at December 31, 2003,
$277 at September 30, 2003 and $517 at December 31, 2002) |   |              | 2,367 |               |   |              | 2,065 |  |   |         | 2,163 | 
|                                                                                                                                                                                                               | Inventories  net                                                                                                            |   |              | 928   |               |   |              | 928   |  |   |         | 986   | 
|                                                                                                                                                                                                               | Income taxes recoverable                                                                                                     |   |              | 59    |               |   |              | 63    |  |   |         | 58    | 
|                                                                                                                                                                                                               | Deferred income taxes  net                                                                                                  |   |              | 384   |               |   |              | 415   |  |   |         | 790   | 
|                                                                                                                                                                                                               | Other current assets                                                                                                         |   |              | 355   |               |   |              | 419   |  |   |         | 681   | 
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total current assets                                                                                                                                                                                           |                                                                                                                              |   | 8,150        |       |               |   | 7,569        |       |  |   | 8,718   |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|Investments                                                                                                                                                                                                    |                                                                                                                              |   | 186          |       |               |   | 183          |       |  |   | 248     |      
|Plant and equipment  net                                                                                                                                                                                      |                                                                                                                              |   | 1,472        |       |               |   | 1,470        |       |  |   | 1,467   |      
|Goodwill                                                                                                                                                                                                       |                                                                                                                              |   | 2,253        |       |               |   | 2,233        |       |  |   | 2,201   |      
|Deferred income taxes  net                                                                                                                                                                                    |                                                                                                                              |   | 3,374        |       |               |   | 3,224        |       |  |   | 2,579   |      
|Other assets including intangible assets  net(2)                                                                                                                                                              |                                                                                                                              |   | 534          |       |               |   | 603          |       |  |   | 900     |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total assets                                                                                                                                                                                                   |                                                                                                                              | $ | 15,969       |       |               | $ | 15,282       |       |  | $ | 16,113  |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                                                           |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|Current liabilities                                                                                                                                                                                            |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|                                                                                                                                                                                                               | Notes payable                                                                                                                |   | $            | 17    |               |   | $            | 23    |  |   | $       | 30    | 
|                                                                                                                                                                                                               | Trade and other accounts payable                                                                                             |   |              | 901   |               |   |              | 768   |  |   |         | 872   | 
|                                                                                                                                                                                                               | Payroll and benefit-related liabilities                                                                                      |   |              | 805   |               |   |              | 708   |  |   |         | 507   | 
|                                                                                                                                                                                                               | Contractual liabilities                                                                                                      |   |              | 737   |               |   |              | 768   |  |   |         | 1,215 | 
|                                                                                                                                                                                                               | Restructuring                                                                                                                |   |              | 214   |               |   |              | 273   |  |   |         | 548   | 
|                                                                                                                                                                                                               | Other accrued liabilities                                                                                                    |   |              | 2,342 |               |   |              | 2,311 |  |   |         | 2,974 | 
|                                                                                                                                                                                                               | Long-term debt due within one year                                                                                           |   |              | 112   |               |   |              | 112   |  |   |         | 233   | 
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total current liabilities                                                                                                                                                                                      |                                                                                                                              |   | 5,128        |       |               |   | 4,963        |       |  |   | 6,379   |      
|Long-term debt                                                                                                                                                                                                 |                                                                                                                              |   | 3,755        |       |               |   | 3,751        |       |  |   | 3,742   |      
|Deferred income taxes  net                                                                                                                                                                                    |                                                                                                                              |   | 208          |       |               |   | 280          |       |  |   | 345     |      
|Other liabilities                                                                                                                                                                                              |                                                                                                                              |   | 2,484        |       |               |   | 2,296        |       |  |   | 2,330   |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total liabilities                                                                                                                                                                                              |                                                                                                                              |   | 11,575       |       |               |   | 11,290       |       |  |   | 12,796  |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Minority interest in subsidiary companies                                                                                                                                                                      |                                                                                                                              |   | 615          |       |               |   | 613          |       |  |   | 665     |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|SHAREHOLDERS EQUITY                                                                                                                                                                                           |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |      
|Common shares, without par value  Authorized shares: unlimited; Issued and
outstanding
shares: 4,173,153,369 at December 31, 2003, 4,003,594,788 at September 30, 2003
and 3,850,169,343 at December 31, 2002 |                                                                                                                              |   | 33,996       |       |               |   | 33,802       |       |  |   | 33,583  |      
|Additional paid-in capital                                                                                                                                                                                     |                                                                                                                              |   | 3,338        |       |               |   | 3,554        |       |  |   | 3,754   |      
|Deferred stock option compensation                                                                                                                                                                             |                                                                                                                              |   | (21          | )     |               |   | (38          | )     |  |   | (91     | )    
|Accumulated deficit                                                                                                                                                                                            |                                                                                                                              |   | (32,507      | )     |               |   | (33,006      | )     |  |   | (33,239 | )    
|Accumulated other comprehensive loss                                                                                                                                                                           |                                                                                                                              |   | (1,027       | )     |               |   | (933         | )     |  |   | (1,355  | )    
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total shareholders equity                                                                                                                                                                                     |                                                                                                                              |   | 3,779        |       |               |   | 3,379        |       |  |   | 2,652   |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 
|Total liabilities and shareholders equity                                                                                                                                                                     |                                                                                                                              | $ | 15,969       |       |               | $ | 15,282       |       |  | $ | 16,113  |      
|                                                                                                                                                                                                               |                                                                                                                              |   |              |       |               |   |              |       |  |   |         |       | 



---

|(1) |  | The unaudited consolidated balance sheet as at December 31, 2003 is
preliminary and is subject to change. Nortel Networks disclaims any intention
or obligation to update or revise such balance sheet prior to the filing of its
reported results for the year ended December 31, 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Included in Other assets were provisions related to long-term accounts
receivable of $288 at December 31, 2003, $294 at September 30, 2003 and $736 at
December 31, 2002.                                                                                                               





---



##### 



NORTEL NETWORKS CORPORATION
Consolidated Statements of Cash Flows (unaudited)
(millions of U.S. dollars)

|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |        |       |        |  
|------------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---------------------------------------- | --- | ------------------ | ---- | ------------ | ---- | --------- | ---- | ----- | ---- | --- | ---- | ----- | ------ | ----- | ------ | -
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      | U.S. GAAP |      |       |      |    
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                   
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     | Three months ended |      | Year ended  
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     | December 31,       |      | December 31,
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |             
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     | 2003(1)            |      | 2002         |      | 2003(1)   |      | 2002 
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |      
|Cash flows from (used in) operating activities         |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Net earnings (loss) from continuing operations                                                                                                                                            |                                                                   | $                                        | 390 |                    |      | $            | (167 | )         |      | $     | 387  |     |      | $     | (3,286 | )    
|                                                       | Adjustments to reconcile net earnings (loss) from continuing
operations to net cash from (used in) operating activities, net of
effects from acquisitions and divestitures of businesses: |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |        |      
|                                                       |                                                                                                                                                                                           | Amortization and depreciation                                     |                                          |     | 142                |      |              |      | 181       |      |       |      | 575 |      |       |        | 709   |       
|                                                       |                                                                                                                                                                                           | Non-cash portion of special charges and related asset write downs |                                          |     | 48                 |      |              |      | (55       | )    |       |      | 56  |      |       |        | 1,235 |       
|                                                       |                                                                                                                                                                                           | Equity in net (earnings) loss of associated companies             |                                          |     | (1                 | )    |              |      | (8        | )    |       |      | 34  |      |       |        | 18    |       
|                                                       |                                                                                                                                                                                           | Current and deferred stock option compensation                    |                                          |     | 21                 |      |              |      | 22        |      |       |      | 90  |      |       |        | 87    |       
|                                                       |                                                                                                                                                                                           | Deferred income taxes                                             |                                          |     | (25                | )    |              |      | 6         |      |       |      | (33 | )    |       |        | (465  | )     
|                                                       |                                                                                                                                                                                           | Other liabilities                                                 |                                          |     | 61                 |      |              |      | 2         |      |       |      | 180 |      |       |        | (12   | )     
|                                                       |                                                                                                                                                                                           | (Gain) loss on repurchases of outstanding debt securities         |                                          |     |                   |      |              |      | (60       | )    |       |      | (4  | )    |       |        | (60   | )     
|                                                       |                                                                                                                                                                                           | (Gain) loss on sale or write down of investments and businesses   |                                          |     | (20                | )    |              |      | 17        |      |       |      | (87 | )    |       |        | (11   | )     
|                                                       |                                                                                                                                                                                           | Other  net                                                       |                                          |     | (111               | )    |              |      | (79       | )    |       |      | (73 | )    |       |        | 451   |       
|                                                       |                                                                                                                                                                                           | Change in operating assets and liabilities:                       |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |        |       |       
|                                                       |                                                                                                                                                                                           |                                                                   | Accounts receivable                      |     |                    | (298 | )            |      |           | (34  | )     |      |     | (174 | )     |        |       | 893    |  
|                                                       |                                                                                                                                                                                           |                                                                   | Inventories                              |     |                    | (7   | )            |      |           | 261  |       |      |     | 91   |       |        |       | 670    |  
|                                                       |                                                                                                                                                                                           |                                                                   | Income taxes                             |     |                    | (2   | )            |      |           | (27  | )     |      |     | 17   |       |        |       | 1,263  |  
|                                                       |                                                                                                                                                                                           |                                                                   | Restructuring                            |     |                    | (106 | )            |      |           | (275 | )     |      |     | (561 | )     |        |       | (1,145 | )
|                                                       |                                                                                                                                                                                           |                                                                   | Accounts payable and accrued liabilities |     |                    | 265  |              |      |           | 166  |       |      |     | (419 | )     |        |       | (816   | )
|                                                       |                                                                                                                                                                                           |                                                                   | Other operating assets and liabilities   |     |                    | (93  | )            |      |           | (111 | )     |      |     | (426 | )     |        |       | (292   | )
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Net cash from (used in) operating activities of continuing operations                                                                                                                     |                                                                   |                                          | 264 |                    |      |              | (161 | )         |      |       | (347 | )   |      |       | (761   | )    
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|Cash flows from (used in) investing activities         |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Expenditures for plant and equipment                                                                                                                                                      |                                                                   |                                          | (67 | )                  |      |              | (46  | )         |      |       | (161 | )   |      |       | (335   | )    
|                                                       | Proceeds on disposals of plant and equipment                                                                                                                                              |                                                                   |                                          | 19  |                    |      |              | 50   |           |      |       | 41   |     |      |       | 406    |      
|                                                       | (Increase) decrease in restricted cash and cash equivalents                                                                                                                               |                                                                   |                                          | 53  |                    |      |              | 189  |           |      |       | 200  |     |      |       | (231   | )    
|                                                       | Increase in long-term receivables                                                                                                                                                         |                                                                   |                                          | (1  | )                  |      |              | (22  | )         |      |       | (13  | )   |      |       | (271   | )    
|                                                       | Decrease in long-term receivables                                                                                                                                                         |                                                                   |                                          | 5   |                    |      |              | 49   |           |      |       | 212  |     |      |       | 302    |      
|                                                       | Acquisitions of investments and businesses  net of cash acquired                                                                                                                         |                                                                   |                                          | (5  | )                  |      |              |     |           |      |       | (59  | )   |      |       | (29    | )    
|                                                       | Proceeds on sale of investments and businesses                                                                                                                                            |                                                                   |                                          | 7   |                    |      |              | 25   |           |      |       | 58   |     |      |       | 104    |      
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Net cash from (used in) investing activities of continuing operations                                                                                                                     |                                                                   |                                          | 11  |                    |      |              | 245  |           |      |       | 278  |     |      |       | (54    | )    
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|Cash flows from (used in) financing activities         |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Increase (decrease) in notes payable  net                                                                                                                                                |                                                                   |                                          | (6  | )                  |      |              | (19  | )         |      |       | (45  | )   |      |       | (333   | )    
|                                                       | Proceeds from long-term debt                                                                                                                                                              |                                                                   |                                          |    |                    |      |              | 1    |           |      |       |     |     |      |       | 33     |      
|                                                       | Repayments of long-term debt                                                                                                                                                              |                                                                   |                                          | (3  | )                  |      |              | (456 | )         |      |       | (270 | )   |      |       | (478   | )    
|                                                       | Increase (decrease) in capital leases payable                                                                                                                                             |                                                                   |                                          | (1  | )                  |      |              | (2   | )         |      |       | (4   | )   |      |       | (10    | )    
|                                                       | Issuance of common shares                                                                                                                                                                 |                                                                   |                                          | 1   |                    |      |              |     |           |      |       | 3    |     |      |       | 863    |      
|                                                       | Issuance of prepaid forward purchase contracts                                                                                                                                            |                                                                   |                                          |    |                    |      |              |     |           |      |       |     |     |      |       | 623    |      
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Net cash from (used in) financing activities of continuing operations                                                                                                                     |                                                                   |                                          | (9  | )                  |      |              | (476 | )         |      |       | (316 | )   |      |       | 698    |      
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Effect of foreign exchange rate changes on cash and cash equivalents                                                                                                                      |                                                                   |                                          | 79  |                    |      |              | 58   |           |      |       | 176  |     |      |       | 74     |      
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|                                                       | Net
cash from (used in) continuing operations                                                                                                                                             |                                                                   |                                          | 345 |                    |      |              | (334 | )         |      |       | (209 | )   |      |       | (43    | )    
|                                                       | Net
cash from (used in) discontinued operations                                                                                                                                           |                                                                   |                                          | 83  |                    |      |              | 35   |           |      |       | 412  |     |      |       | 374    |      
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|Net increase (decrease) in cash and cash equivalents   |                                                                                                                                                                                           |                                                                   | 428                                      |     |                    |      | (299         | )    |           |      | 203   |      |     |      | 331   |       
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|Cash and cash equivalents at beginning of period  net |                                                                                                                                                                                           |                                                                   | 3,566                                    |     |                    |      | 4,090        |      |           |      | 3,791 |      |     |      | 3,460 |       
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       
|Cash and cash equivalents at end of period  net       |                                                                                                                                                                                           | $                                                                 | 3,994                                    |     |                    | $    | 3,791        |      |           | $    | 3,994 |      |     | $    | 3,791 |       
|                                                       |                                                                                                                                                                                           |                                                                   |                                          |     |                    |      |              |      |           |      |       |      |     |      |       |       



---

|(1) |  | The unaudited consolidated statements of cash flows for the three months
and year ended December 31, 2003 are preliminary and are subject to change.
Nortel Networks disclaims any intention or obligation to update or revise such
statements of cash flows prior to the filing of its reported results for the
year ended December 31, 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





---



##### 



NORTEL NETWORKS CORPORATION
Consolidated Results (unaudited)
Supplementary Information
(millions of U.S. dollars)

Revenues

|            |                     |  |                    |       |      |  |          |       |              |  |      |      |          |  |   |       |  |  |   |        |  |  |  |     |   
|----------- | ------------------- |  | ------------------ | ----- | ---- |  | -------- | ----- | ------------ |  | ---- | ---- | -------- |  | - | ----- |  |  | - | ------ |  |  |  | --- | --
|            |                     |  | U.S. GAAP         
|            |                     |  |                   
|            |                     |  | Three months ended |       |      |  |          |       | Year ended   |  |      |      |         
|            |                     |  | December 31,       |       |      |  |          |       | December 31, |  |      |      |         
|            |                     |  |                    |       |      |  |          |       |              |  |      |      |         
|            |                     |  | 2003(1)            |       | 2002 |  | % Change |       | 2003(1)      |  | 2002 |      | % Change
|            |                     |  |                    |       |      |  |          |       |              |  |      |      |         
|By segment: |                     |  |                    |       |      |  |          |       |              |  |      |      |          |  |   |       |  |  |   |        |  |  |  |    
|            | Wireless Networks   |  | $                  | 1,356 |      |  | $        | 1,020 |              |  |      | 33   | %        |  | $ | 4,295 |  |  | $ | 4,216  |  |  |  | 2   | % 
|            | Enterprise Networks |  |                    | 638   |      |  |          | 651   |              |  |      | (2   | %)       |  |   | 2,375 |  |  |   | 2,579  |  |  |  | (8  | %)
|            | Wireline Networks   |  |                    | 551   |      |  |          | 506   |              |  |      | 9    | %        |  |   | 2,045 |  |  |   | 2,263  |  |  |  | (10 | %)
|            | Optical Networks    |  |                    | 281   |      |  |          | 344   |              |  |      | (18  | %)       |  |   | 1,091 |  |  |   | 1,468  |  |  |  | (26 | %)
|            | Other               |  |                    |      |      |  |          | 4     |              |  |      | (100 | %)       |  |   | 1     |  |  |   | 43     |  |  |  | (98 | %)
|            |                     |  |                    |       |      |  |          |       |              |  |      |      |          |  |   |       |  |  |   |        |  |  |  |     |   
|            | Total               |  | $                  | 2,826 |      |  | $        | 2,525 |              |  |      | 12   | %        |  | $ | 9,807 |  |  | $ | 10,569 |  |  |  | (7  | %)
|            |                     |  |                    |       |      |  |          |       |              |  |      |      |          |  |   |       |  |  |   |        |  |  |  |     |   

|                         |               |   |                    |       |      |   |          |       |              |  |      |     |          |   |       |       |  |   |        |       |  |  |    |     |   
|------------------------ | ------------- | - | ------------------ | ----- | ---- | - | -------- | ----- | ------------ |  | ---- | --- | -------- | - | ----- | ----- |  | - | ------ | ----- |  |  | -- | --- | --
|                         |               |   | U.S. GAAP         
|                         |               |   |                   
|                         |               |   | Three months ended |       |      |   |          |       | Year ended   |  |      |     |         
|                         |               |   | December 31,       |       |      |   |          |       | December 31, |  |      |     |         
|                         |               |   |                    |       |      |   |          |       |              |  |      |     |         
|                         |               |   | 2003(1)            |       | 2002 |   | % Change |       | 2003(1)      |  | 2002 |     | % Change
|                         |               |   |                    |       |      |   |          |       |              |  |      |     |         
|By
geographic region:(2) |               |   |                    |       |      |   |          |       |              |  |      |     |          |   |       |       |  |   |        |       |  |  |    |    
|                         | United States |   | $                  | 1,586 |      |   | $        | 1,256 |              |  |      | 26  | %        |   | $     | 5,091 |  |   | $      | 5,390 |  |  |    | (6  | %)
|                         | EMEA(3)       |   |                    | 604   |      |   |          | 635   |              |  |      | (5  | %)       |   |       | 2,371 |  |   |        | 2,562 |  |  |    | (7  | %)
|                         | Canada        |   |                    | 195   |      |   |          | 132   |              |  |      | 48  | %        |   |       | 574   |  |   |        | 655   |  |  |    | (12 | %)
|                         | Other         |   |                    | 441   |      |   |          | 502   |              |  |      | (12 | %)       |   |       | 1,771 |  |   |        | 1,962 |  |  |    | (10 | %)
|                         |               |   |                    |       |      |   |          |       |              |  |      |     |          |   |       |       |  |   |        |       |  |  |    |     |   
|Total                    |               | $ | 2,826              |       |      | $ | 2,525    |       |              |  | 12   | %   |          | $ | 9,807 |       |  | $ | 10,569 |       |  |  | (7 | %) 
|                         |               |   |                    |       |      |   |          |       |              |  |      |     |          |   |       |       |  |   |        |       |  |  |    |     |   

Percentage change in revenue by segment and geographic region

|                                  |                     |  |                       |    |      |  |        |    |              |  |         |    |       |  |  |     |    |  |  |    |   |  |  |    |  
|--------------------------------- | ------------------- |  | --------------------- | -- | ---- |  | ------ | -- | ------------ |  | ------- | -- | ----- |  |  | --- | -- |  |  | -- | - |  |  | -- | -
|                                  |                     |  | U.S. GAAP            
|                                  |                     |  |                      
|                                  |                     |  | Q4 2003
vs Q3 2003(1)
|                                  |                     |  |                      
|                                  |                     |  | United States         |    | EMEA |  | Canada |    | Asia Pacific |  | CALA(4) |    | Total
|                                  |                     |  |                       |    |      |  |        |    |              |  |         |    |      
|By segment and geographic region: |                     |  |                       |    |      |  |        |    |              |  |         |    |       |  |  |     |    |  |  |    |   |  |  |   
|                                  | Wireless Networks   |  |                       | 52 | %    |  |        | 16 | %            |  |         | 80 | %     |  |  | (13 | %) |  |  | 26 | % |  |  | 35 | %
|                                  | Enterprise Networks |  |                       | 11 | %    |  |        | 12 | %            |  |         | 31 | %     |  |  | (10 | %) |  |  | 6  | % |  |  | 10 | %
|                                  | Wireline Networks   |  |                       | 47 | %    |  |        | (7 | %)           |  |         | 70 | %     |  |  | 14  | %  |  |  | 29 | % |  |  | 26 | %
|                                  | Optical Networks    |  |                       | 26 | %    |  |        | 36 | %            |  |         | 38 | %     |  |  | (37 | %) |  |  | 80 | % |  |  | 16 | %
|                                  | Other               |  |                       | 0  | %    |  |        | 0  | %            |  |         | 0  | %     |  |  | 0   | %  |  |  | 0  | % |  |  | 0  | %
|                                  | Total               |  |                       | 38 | %    |  |        | 11 | %            |  |         | 56 | %     |  |  | (13 | %) |  |  | 28 | % |  |  | 25 | %

|                                  |                     |  |                       |    |      |  |        |      |              |  |      |     |       |  |  |     |    |  |  |     |    |  |  |      |   
|--------------------------------- | ------------------- |  | --------------------- | -- | ---- |  | ------ | ---- | ------------ |  | ---- | --- | ----- |  |  | --- | -- |  |  | --- | -- |  |  | ---- | --
|                                  |                     |  | U.S. GAAP            
|                                  |                     |  |                      
|                                  |                     |  | Q4 2003
vs Q4 2002(1)
|                                  |                     |  |                      
|                                  |                     |  | United States         |    | EMEA |  | Canada |      | Asia Pacific |  | CALA |     | Total
|                                  |                     |  |                       |    |      |  |        |      |              |  |      |     |      
|By segment and geographic region: |                     |  |                       |    |      |  |        |      |              |  |      |     |       |  |  |     |    |  |  |     |    |  |  |     
|                                  | Wireless Networks   |  |                       | 53 | %    |  |        | 2    | %            |  |      | 167 | %     |  |  | (20 | %) |  |  | 39  | %  |  |  | 33   | % 
|                                  | Enterprise Networks |  |                       | 1  | %    |  |        | (8   | %)           |  |      | 13  | %     |  |  | (7  | %) |  |  | (18 | %) |  |  | (2   | %)
|                                  | Wireline Networks   |  |                       | 9  | %    |  |        | (5   | %)           |  |      | 142 | %     |  |  | (2  | %) |  |  | 22  | %  |  |  | 9    | % 
|                                  | Optical Networks    |  |                       | 9  | %    |  |        | (10  | %)           |  |      | (30 | %)    |  |  | (58 | %) |  |  | 50  | %  |  |  | (18  | %)
|                                  | Other               |  |                       | 0  | %    |  |        | (100 | %)           |  |      | 0   | %     |  |  | 0   | %  |  |  | 0   | %  |  |  | (100 | %)
|                                  | Total               |  |                       | 26 | %    |  |        | (5   | %)           |  |      | 48  | %     |  |  | (25 | %) |  |  | 27  | %  |  |  | 12   | % 

|                                  |                     |  |                 |  |      |  |        |      |              |  |      |      |       |  |  |      |    |  |  |     |    |  |  |     |   
|--------------------------------- | ------------------- |  | --------------- |  | ---- |  | ------ | ---- | ------------ |  | ---- | ---- | ----- |  |  | ---- | -- |  |  | --- | -- |  |  | --- | --
|                                  |                     |  | U.S. GAAP      
|                                  |                     |  |                
|                                  |                     |  | 2003
vs 2002(1)
|                                  |                     |  |                
|                                  |                     |  | United States   |  | EMEA |  | Canada |      | Asia Pacific |  | CALA |      | Total
|                                  |                     |  |                 |  |      |  |        |      |              |  |      |      |      
|By segment and geographic region: |                     |  |                 |  |      |  |        |      |              |  |      |      |       |  |  |      |    |  |  |     |    |  |  |     |   
|                                  | Wireless Networks   |  |                 |  |      |  |        | 2    | %            |  |      | 11   | %     |  |  | (21  | %) |  |  | (8  | %) |  |  | 22  | % 
|                                  | Enterprise Networks |  |                 |  |      |  |        | (9   | %)           |  |      | (7   | %)    |  |  | 7    | %  |  |  | (6  | %) |  |  | (23 | %)
|                                  | Wireline Networks   |  |                 |  |      |  |        | (7   | %)           |  |      | (5   | %)    |  |  | 23   | %  |  |  | (11 | %) |  |  | (60 | %)
|                                  | Optical Networks    |  |                 |  |      |  |        | (22  | %)           |  |      | (38  | %)    |  |  | (39  | %) |  |  | (9  | %) |  |  | (12 | %)
|                                  | Other               |  |                 |  |      |  |        | (100 | %)           |  |      | (100 | %)    |  |  | (100 | %) |  |  | 0   | %  |  |  | 100 | % 
|                                  | Total               |  |                 |  |      |  |        | (6   | %)           |  |      | (7   | %)    |  |  | (12  | %) |  |  | (8  | %) |  |  | (13 | %)



---

|(1) |  | These unaudited consolidated results are preliminary and are subject to
change. Nortel Networks disclaims any intention or obligation to update
or revise these preliminary consolidated results prior to the filing of
its reported results for the year ended December 31, 2003.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Revenues were attributable to geographic regions based on the location of
the customer.                                                                                                                                                                                           
|   
|(3) |  | The Europe, Middle East and Africa region.                                                                                                                                                                                                                                        
|   
|(4) |  | The Caribbean and Latin America region.