Fourth Quarter Results
Revenues increased 21% to US$6.99 billion for the fourth quarter of 1999 from US$5.77 billion for the same period in 1998. Net earnings from operations applicable to common shares(a) for the quarter were US$755 million, or US$0.55 per share, compared to US$477 million, or US$0.36 per share, for the same period in 1998, an increase in earnings per share from operations of 53 percent. Including Acquisition Related Costs (a) and one-time gains and charges, Nortel Networks recorded net earnings applicable to common shares in the fourth quarter of 1999 of US$417 million or US$0.30 per share.

The overall increase in net earnings from operations in the quarter was driven by higher revenues and gross profit and a decrease in the effective tax rate.

"We are extremely pleased with our strong growth in the fourth quarter," said John Roth, president and chief executive officer, Nortel Networks. "Our strong financial performance with carrier and service provider customers reflected our leadership position in creating the high-performance Internet."

1999 Results
For the year 1999, revenues increased 26 percent to US$22.22 billion from US$17.58 billion for the year 1998. Net earnings from operations applicable to common shares (a) for the year 1999 were US$1.73 billion, or US$1.28 per share, compared to US$1.07 billion, or US$0.93 per share for 1998, an increase in earnings per share from operations of 38 percent. Including Acquisition Related Costs (a) and one-time gains and charges, Nortel Networks recorded a net loss of US$197 million, or US$0.15 per share, for 1999.

"We are extremely pleased with the strength in our optical and high-speed Internet access capabilities as well as the success of our wireless solutions which overcame volatility in South America early in the year," said John Roth, president and chief executive officer. "We are proud of our record results which reflect success in several key Internet markets and geographic areas while continuing to lay the foundation for continued strong growth at the heart of the Internet in 2000."

"Highlights for 1999 included:

• Our Optical Internet business grew more than 80% over 1998, driven by explosive customer demand. We moved into the #1 market share position globally in SONET/SDH and DWDM, according to Ryan Hankin Kent.
• We made significant inroads in the rapidly growing high-speed Internet access market. With one of the broadest portfolios available, we were selected by a variety of service providers for our solutions using copper, cable or wireless technologies.
• We experienced strong momentum in the wireless infrastructure business in the second half of the year as customers endorsed our strategy for the Wireless Internet resulting in several key contract wins and third generation trials.
• Our ATM/IP carrier routing/switching portfolio built momentum as we exited the year and overall, we made significant market share gains as reported by Cahners In-Stat.
• We completed or announced key product introductions and acquisitions that continue to enhance our market leading Internet capabilities, including OPTera* 1600G 160 channel optical amplification system, OPTera* LH open optical platform and the proposed acquisition of Qtera's* extra long haul regeneration capabilities for the Optical Internet; OPTera* Packet Solution to deliver highly reliable optical switching and routing capabilities for carrier networks; Internet Communications Architecture and Open IP strategies for Enterprise networking solutions; and Periphonics'* web-enabled Interactive Voice Response capabilities and our proposed acquisition of Clarify's* customer relationship management capabilities for second generation eBusiness solutions.

"Overall, 1999 was a great year. We announced a record number of acquisitions; entered into more than 20 commitments for Internet backbone networks globally; began the realignment of our manufacturing to leverage the capabilities of the outsourcing industry and committed to tripling our Optical Internet manufacturing capacity. We are extremely pleased with how we have been able to better serve our customers through our strengths, agility and execution."

Commenting on his outlook for 2000, Mr. Roth said: "Our strong customer relationships and industry leading position in high-growth Internet markets reinforces my confidence in our continued success in 2000. We will continue to optimize our operations model and realign our workforce throughout 2000 around the Internet growth engines. We enter the new millennium with a strong order book and customer momentum across the high-growth segments of our business."

Revenue Breakdown Segment revenues for the fourth quarter of 1999 increased 31 percent for the Carrier segment and decreased 5 percent for the Enterprise segment over the same period in 1998. For the full year 1999, Carrier segment revenues increased 26 percent and Enterprise segment revenues increased 33 percent compared to 1998.

Carrier segment revenues reflected strong growth in both Optical Internet and high-speed Internet access solutions in the United States, Europe and Latin America in the quarter and for the year compared to the same periods in 1998. Mobility revenues were strong in the quarter in the United States, Europe, Latin America and Asia Pacific and, overall, grew significantly in the year.

Enterprise segment revenues decreased in the quarter compared to the same period in 1998 primarily due to lower data networking revenues. For the full year 1999, Enterprise segment revenues increased, primarily driven by the increase in data networking revenues due to the Bay Networks merger.

Geographic revenues for the fourth quarter of 1999 compared to the fourth quarter of 1998 increased 30 percent outside the United States and Canada, and 20 percent in the United States, while revenues in Canada declined 12 percent. For the full year 1999, revenues increased 30 percent in the United States, 26 percent outside the United States and Canada, and 5 percent in Canada.

Expenses
Selling, general and administrative ("SG&A") expenses in the quarter were US$1.23 billion, or 17.6 percent of revenue, compared with US$1.03 billion, or 17.8 percent of revenue, in the fourth quarter of 1998. For the full year 1999, SG&A expenses were US$4.10 billion, or 18.5 percent of revenue, compared with US$3.09 billion, or 17.6 percent of revenue, for 1998. The SG&A expenses in the quarter reflected investments to support Nortel Networks global growth and, as a percentage of revenues, reflected the impact of ongoing workforce realignment.

Research and development ("R&D") expenses were US$786 million, or 11.2 percent of revenue, in the quarter, compared with US$652 million, or 11.3 percent of revenue, in the fourth quarter of 1998. For the full year 1999, R&D expenses were US$2.91 billion, or 13.1 percent of revenue, compared with US$2.45 billion, or 14 percent of revenue, for 1998. The increased R&D expenses in the quarter reflected planned expenses in the Carrier and Enterprise segments focused on data networking and IP technologies.

Nortel Networks is a global leader in telephony, data, wireless and wireline solutions for the Internet. The Company had 1999 revenues of US$22.2 billion and serves carrier, service provider and enterprise customers globally. Today, Nortel Networks is creating a high-performance Internet that is more reliable and faster than ever before. It is redefining the economics and quality of networking and the Internet through Unified Networks* that promise a new era of collaboration, communications and commerce. Visit us 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 impact of price and product competition; the dependence on new product development; the impact of rapid technological and market change; the ability of Nortel Networks to integrate the operations and technologies of acquired businesses in an effective manner; general industry and market conditions and growth rates; international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; unanticipated impact of Year 2000 issues; and the impact of consolidations in the telecommunications industry. For additional information with respect to certain of these and other factors, see the reports filed by Nortel Networks with the United States Securities and Exchange Commission. 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. (a) Net earnings from operations applicable to common shares is defined as reported net earnings applicable to common shares before "Acquisition Related Costs" (the amortization of intangible assets from the acquisition of Bay Networks, Inc. ("Bay Networks") and all subsequent acquisitions, and the amortization of any purchased in-process research and development from prior acquisitions) and one-time gains and charges.