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SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 Date of Report
(date of earliest event reported)
June 2, 2004 Nortel Networks Limited (Exact name of registrant as specified in its charter)
 CANADA
    
    000-30758
    
    62-12-62580(State or other jurisdiction
of incorporation)
    
    (Commission
File Number)
    
    (IRS Employer
Identification No.)
 8200 Dixie Road, Suite 100, Brampton, Ontario, Canada
    
    L6T 5P6(Address
of principal executive offices)
    
    (Zip code)
 Registrants telephone number, including area code (905) 863-0000.




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Item 5.
    
    Other Events On June 2, 2004, Nortel
Networks Corporation (the Company) issued a press release
providing a status update on its financial restatement process and
other related matters and additional information regarding its
business performance. As indicated previously, the Company will provide regular updates to the market
as it is able to do so regarding the restatement process and related matters
and ongoing business performance. This status update is being provided by the
Company and Nortel Networks Limited (NNL), the Companys principal operating
subsidiary, pursuant to the alternative information guidelines of the Ontario
Securities Commission (OSC). These guidelines contemplate that the Company
and NNL will normally provide bi-weekly updates on their affairs until such
time as they are current with their filing obligations under Canadian
securities laws. Independent Review, Status of Restatements and Revisions to Financial Results As previously announced, the independent review being undertaken by the Nortel
Networks Audit Committee is continuing and is focused on managements practices
regarding accruals and provisions. This review also includes the second half of
2003 in accordance with the extended assignment announced on April 28, 2004. The Company continues the work to restate the financial results reported in
each of its quarters of 2003 and for earlier periods including 2002 and 2001 as
announced previously. The detailed review is now underway with respect to the
third and fourth quarters of 2003. The process to complete the full year 2003
and interim 2004 financial statements and the restated financial statements
requires significant time due to the volume and complexity of the work
involved, including the review and confirmation of supporting documentation and
circumstances for thousands of accounting entries in ledgers and sub-ledgers
across geographic regions over a number of years. The Companys Audit Committee initiated and is directing the independent review
and is striving to have the work completed as soon as practical but it must
allow for thoroughness and accuracy. The Audit Committee is committed to
addressing any and all problems this review identifies. Following completion of the independent review, the Company will work to
complete its full year 2003 and interim 2004 financial statements and the
restated financial statements and to facilitate the completion of the related
audits of full year results as soon as practicable. In light of the work yet to
be done to complete the independent review and financial statements (including
the audit of the annual financial statements by the Companys independent
auditors, Deloitte & Touche LLP), the Company and NNL will not be in a position
to file the relevant financial statements in the second quarter of 2004. The
Company is also not in a position to provide an anticipated filing date as this
date is dependent upon the timing of the completion and results of the
independent review. To assist in completing the restatements as quickly as possible, the Company
has been working with Ernst & Young LLP which has been providing certain
advisory services and additional accounting resources in support of
managements restatement activities. In addition, the Company has also
initiated work with other outside consultants to undertake a review and
assessment of the Companys finance organization and processes as well as its
financial systems. These consultations are intended to review and strengthen
the Companys internal processes and controls. Based on the Companys work to date, including the work done since the update
provided on April 28, 2004 related to the planned restatements, and subject to
the limitations described below, the principal impacts of the restatements and
revisions identified to date to the Companys results continue to reflect the
following:  
    
    A reduction of approximately 50 percent in previously announced net earnings for 2003; these amounts will largely be
reported in prior periods, resulting in a reduction in previously reported net losses for such periods including 2002 and
2001;




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
    
    A reported net loss for the first half of 2003 compared to the previously announced net earnings for that period; the net
income reductions are expected to substantially impact the Companys continuing operations rather than discontinued
operations in the first half of 2003;
    
    No material impact to prior period revenues; and
    
    No material impact to the Companys cash balance as at December 31, 2003. As previously indicated, the Companys work to date with respect to the planned
restatements and revisions and the expected impacts mentioned above are subject
to a number of important limitations, including:  
    
    Expectations as to the impacts continue to be partial and preliminary;
    
    The ongoing work of the Nortel Networks Audit Committee independent review;
    
    The significant work to be done by the Company, including with respect to the detailed review of the second half of 2003,
accounting documentation and reporting systems issues and the impact of accounting for certain matters, including foreign
exchange;
    
    The previously disclosed material weaknesses in the Companys internal controls over financial reporting; and
    
    The audit of the Nortel Networks financial statements by the Companys independent auditors. In addition, until the Company finalizes its financial statements for the year
2003, subsequent events or information will result in adjustments to certain
estimates used in the preparation of the Companys year end and/or quarter end
financial statements. At this time, the Company cannot estimate the impact of
any such adjustments on its results of operations or financial position. Please note that the preliminary and partial estimates of the impacts of the
restatements provided above have not been the subject of a review or audit
engagement by Nortel Networks independent auditors, Deloitte & Touche LLP. Update on Q1 2004 Financial Results Due to the ongoing independent review and impact of subsequent events
adjustments, the Company is not in a position at this time to provide any
information regarding first quarter 2004 financial results beyond the
previously announced preliminary unaudited cash balance of
approximately US$3.6 billion as at March 31, 2004. Business Developments The Company continues to see good business momentum reflecting continued
customer support for its strong portfolio of next generation network solutions.
Highlights of some recent announcements include:  
    
    Continued success in the cable multiple system operator (MSO) market segments with Voice Over IP (VoIP) wins announced with
Charter Communications (USA), Telenet (Belgium) and VTR (Chile);
    
    Advances in 3G wireless solutions  selected as national 3G provider to Pelephone in Israel for CDMA 2000 1X EV-DO
equipment and implemented UMTS-based 3G services with Orange for the Cannes International Film Festival;
    
    Gains with service provider voice over packet solutions with a contract win with Bell South;
    
    Helping enterprises leverage next generation networking solutions to transform their business including working with the
FedEx Institute of Technology to support the State of Tennessees Workforce of the Future program and upgrading the China
State Tax System in Beijing; and




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
    
    Launching the Multiservice Provider Edge, a new IP edge networking solution that will set new standards in IP networking
reliability for service provider networks. The Company continues to 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 and expects to grow its revenues faster than the market. Nortel Networks Limited The financial results of NNL are consolidated into the Companys results. NNLs
financial statements for the applicable periods will also be restated upon the
related restatements of the Companys financial statements. NNLs preferred
shares are publicly traded in Canada. Update on Certain Potential Impacts Debt Securities As previously announced, as a result of the delay in the filing of the 2003
Form 10-K beyond March 30, 2004, the Company and NNL are not in compliance with
their obligations to deliver to relevant parties their filings with the United
States Securities and Exchange Commission (the SEC) under their public debt
indentures. Approximately US$1.8 billion of notes of NNL (or its subsidiaries)
and US$1.8 billion of convertible debt securities of the Company are
outstanding under the indentures. The delay does not result in an automatic
event of default and acceleration of the long-term debt of the Company or NNL.
If the holders of at least 25 percent of the outstanding principal amount of
any relevant series of debt securities provide notice of such non-compliance to
the Company or NNL, as applicable, and the Company or NNL, as applicable, fails
to file and deliver the relevant 2003 Form 10-K within 90 days after such
notice is provided, then the trustee under the indenture or such holders will
have the right to accelerate the maturity of the relevant series of debt
securities. While such notice could have been given at any time after March 30,
2004, to date neither the Company nor NNL has received any such notice. In
addition, if the required percentage of holders under one series of debt
securities were to give such a notice and, after the 90-day cure period
expired, were to accelerate the maturity of such debt securities, then the
principal amount of each other series of debt securities could, upon 10 days
notice, be accelerated without the lapse of an additional 90-day cure period.
Similar issues arise under the public debt indentures in relation to the
failure by the Company and NNL to deliver to relevant parties their respective
Quarterly Reports on Form 10-Q for the first quarter of 2004. Based upon
inquiries made in connection with the Companys April 28, 2004 press release,
which inquiries have not been updated, the Company believes that approximately
34 percent of the outstanding principal amount of the US$150 million 7.875%
notes due June 2026 issued by a subsidiary of NNL and guaranteed by it are held
by a group of related holders. Other than with respect to that series of debt
securities, based on such inquiries, neither the Company nor NNL is aware of
any holder, or group of related holders or parties, that holds at least 25
percent of the outstanding principal amount of any relevant series of debt
securities. The Company also believes based on such inquiries that
approximately 23 percent of the outstanding principal amount of the US$150
million 7.40% notes due June 2006 issued by NNL are held by a single holder. If an acceleration of the Companys and NNLs debt securities were to occur,
the Company and NNL may be unable to meet their respective payment obligations
with respect to the related indebtedness. In such case, the Company and NNL
would seek alternative financing sources to satisfy such obligations. At
present, neither the Company nor NNL has any agreements or understandings in
place with respect to any such financing. EDC Support Facility As previously announced on May 28, 2004, NNL has obtained a new waiver from
Export Development Canada (EDC) of certain defaults under the EDC
performance-related support facility related to the delay by NNL in meeting its
filing obligations with the SEC and planned restatements. The prior waiver
obtained on March 29, 2004 was scheduled to expire on May 29, 2004. The new
waiver will remain in effect until the earliest of certain events, including:




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
    
    The date on which both NNL and the Company have filed their respective
2003 Forms 10-K and First Quarter 2004 Forms 10-Q with the SEC;
    
    August 30, 2004; or
    
    At the election of EDC and on no less than one and no more than three
business days written notice to NNL, July 30, 2004. During the waiver period, the new waiver maintains the existing uncommitted
support available under the EDC support facility and reclassifies the
previously committed portion of the EDC support facility as uncommitted
support. The EDC support facility provides up to US$750 million in support of
which, prior to the new waiver, US$300 million was for committed support and,
as of May 28, 2004, approximately $105 million of such committed support was
unused. As of May 28, 2004, there was approximately US$328 million of
outstanding support utilized under the EDC support facility. There can be no
assurance that EDC will provide any additional support under the uncommitted
EDC support facility. Notwithstanding the new waiver, the Company and NNL are
providing no assurance that they will file their respective 2003 Forms 10-K and
First Quarter 2004 Forms 10-Q within the waiver period or, if they fail to do
so, that NNL would receive any further waivers or any extensions of the waiver
beyond its scheduled expiry date. If the new waiver were terminated or expired
prior to the filing of such 2003 Forms 10-K and First Quarter 2004 Forms 10-Q,
EDC would have the right at such time to require NNL to cash collateralize the
support outstanding under the EDC facility and to exercise its rights against
the collateral under NNLs related security agreements. Other Matters Directorships As previously announced, on April 29, 2004, the Board of Directors of each of
the Company and NNL appointed Dr. rer. pol. Manfred Bischoff to serve as a
director of each respective company. In addition, Dr. Bischoff was also
appointed on that date to serve as a member of the respective Audit Committee
of each of the Company and NNL and the Pension Fund Policy Committee of NNL. As previously announced, on May 26, 2004, the Board of Directors of each of the
Company and NNL appointed the Hon. John Manley to serve as a director of each
respective company. On May 21, 2004, each of the Company and NNL received the resignation of Frank
Dunn as a director of each respective company. OSC Management Cease Trade Order On May 31, 2004, the OSC issued a final order prohibiting certain directors,
senior officers and certain current and former employees of the Company and NNL
from trading in the securities of the Company and NNL, which finalized the
temporary order issued on May 17, 2004. This final order will remain in effect
until two full business days following the receipt by the OSC of all filings
required to be made by the Company and NNL pursuant to Ontario securities laws.
Securities commissions in certain other provinces have issued, or will shortly
issue, similar final orders with respect to certain insiders of the Company and
NNL who are residents in those jurisdictions. Annual Shareholders Meeting The Company intends to make an application to the Ontario Superior Court of
Justice for an order extending the time for calling the Companys 2004 Annual
Shareholders Meeting past the statutory deadline of June 30, 2004. The
postponement is being sought because Canadian law requires that the Companys
2003 audited financial statements be placed before the shareholders at the
Annual Shareholders Meeting.




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Status of Regulatory and Criminal Investigations As previously announced, the SEC and the OSC have commenced investigations in
connection with the Companys previous restatement of its financial results and
the Companys announcements in March 2004. As announced on May 14, 2004, Nortel
Networks received a Federal Grand Jury Subpoena for the production of certain
documents sought in connection with an ongoing criminal investigation being
conducted by the U.S. Attorneys Office for the Northern District of Texas,
Dallas Division. Further, the Royal Canadian Mounted Police has advised the
Company that it is conducting a review of the Companys accounting situation to
determine the need for a criminal investigation. Nortel Networks will continue
to cooperate fully with all authorities in connection with these investigations
and reviews. Status of Civil Proceedings Subsequent to the March 10, 2004 announcement in which Nortel Networks
indicated it was likely that it would need to revise its previously announced
unaudited results for the year ended December 31, 2003, and the results
reported in certain of its quarterly reports for 2003, and to restate its
previously filed financial results for one or more earlier periods, 27 class
action complaints have been filed against Nortel Networks in the Southern
District of New York and one Employee Retirement Income Security Act (ERISA)
class action complaint has been filed against Nortel Networks in the Middle
District of Tennessee (Nashville). The 27 class action complaints variously allege that, in connection with the
comprehensive review and analysis of Nortel Networks assets and liabilities,
the defendants made materially false and misleading statements in violation of
U.S. securities laws. The named defendants in most of the actions also include
Frank Dunn, Douglas Beatty and Michael Gollogly. The ERISA class action is brought on behalf of the Nortel Networks Long-Term
Investment Plan (the Plan) and the Plan participants and beneficiaries whose
retirement accounts held Nortel Networks common shares from at least December
23, 2003 through and including the date of the complaint. The complaint alleges
that these Plan participants and beneficiaries suffered losses to their
respective Plan retirement accounts due to the defendants breaches of
fiduciary duty. The named defendants are Nortel Networks, Frank Dunn and the
Nortel Networks board of directors (excluding newly appointed board members Dr.
rer. pol. Manfred Bischoff and the Hon. John Manley). Certain information
included in this report is forward-looking and is
subject to important risks and uncertainties. The results or events predicted
in these statements may differ materially from actual results or events.
Factors which could cause results or events to differ from current expectations
include, among other things: the outcome of Nortel Networks independent review
and planned restatement of its previously announced or filed financial results;
the impact of the management changes announced on April 28, 2004; the impact of
the inability to meet Nortel Networks filing obligations on support facilities
and public debt obligations; the sufficiency of Nortel Networks restructuring
activities, including the potential for higher actual costs to be incurred in
connection with restructuring actions compared to the estimated costs of such
actions; continued reductions in spending by Nortel Networks customers;
fluctuations in Nortel Networks operating results and general industry,
economic and market conditions and growth rates; the communication by Nortel
Networks auditors of the existence of material weaknesses in internal control;
Nortel Networks ability to recruit and retain qualified employees; fluctuations
in Nortel Networks cash flow, level of outstanding debt and current debt
ratings; the use of cash collateral to support Nortel Networks normal course
business activities; the dependence on Nortel Networks subsidiaries for
funding; the impact of Nortel Networks defined benefit plans and deferred tax
assets on results of operations and Nortel Networks cash flows; Nortel Networks
dependence on new product development and its ability to predict market demand
for particular products; Nortel Networks ability to integrate the operations
and technologies of acquired businesses in an effective manner; the impact of
rapid technological and market change; the impact of price and product
competition; barriers to international growth and global economic conditions,
particularly in emerging markets and including interest rate and currency
exchange rate fluctuations; the impact of rationalization in the
telecommunications industry; changes in regulation of the Internet; the impact
of the credit risks of Nortel Networks customers and the impact of customer
financing and commitments; stock market volatility generally and as a result of
acceleration of the settlement date or early settlement of Nortel Networks
purchase contracts; the impact of Nortel Networks supply and outsourcing
contracts that contain delivery and installation provisions, which, if not met,
could result in the payment of substantial penalties or liquidated damages; the
future success of Nortel Networks strategic alliances; and the adverse
resolution of litigation, investigations, intellectual property disputes and
similar matters. For additional information with respect to certain of these
and other factors, see the most recent Form 10-Q/A and Form 10-K/A filed by
Nortel Networks with the United States Securities and Exchange Commission.
Unless otherwise required by applicable securities laws, Nortel Networks
disclaims any intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. Nortel Networks Corporation
owns all of the Registrants common shares and the Registrant is
Nortel Networks Corporations principal direct operating
subsidiary.




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SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized. NORTEL NETWORKS LIMITEDBy:
    /s/ Nicholas J. DeRomaNicholas J. DeRomaChief Legal Officer By:
    /s/
Deborah J. NobleDeborah J. NobleDated:  June 2, 2004
    
    Corporate Secretary