Revenues increased 48 percent to US$6.32 billion for the first quarter of 2000 from US$4.29 billion in the same period in 1999. Net earnings from operations applicable to common shares(a) for the quarter were US$347 million, or US$0.23 per share on a fully diluted basis, compared to US$193 million, or US$0.14 per share on a fully diluted basis, for the same period in 1999, an increase in earnings per share from operations of 64 percent. Including Acquisition Related Costs (a) and one-time gains and charges, Nortel Networks recorded a net loss applicable to common shares in the first quarter of 2000 of US$730 million or US$0.52 per share.

"Nortel Networks outstanding growth in the quarter reflected the continued market leadership for our Optical Internet, Wireless Internet and high speed Internet access solutions," said John Roth, president and chief executive officer, Nortel Networks. "Since the beginning of the year, we achieved a number of significant milestones in our ongoing efforts to extend our leadership in key market segments and to streamline our operations, including:

• Optical Capacity Implementation: The US$400 million capacity expansion announced in November 1999 is coming on stream as planned and another US$260 million investment was announced in February to provide even more capacity by year end to meet customer demand.
• Global Optical Internet Leadership: Revenues grew more than 150 percent in the quarter over the same period last year as we continued to see strong demand for high speed optical solutions. We further strengthened our position in the marketplace and continued to drive technology discontinuities with the announced acquisitions of Xros, a provider of fully photonic switching solutions, and CoreTek, a developer of tunable lasers and next generation tunable optical components .
• Strong Momentum In Wireless Internet: Mobility revenues grew more than 45 percent in the quarter compared to the first quarter 1999 with renewed growth in South America and some key new contract announcements such as the deployment by BLU S.p.A. of a nationwide digital wireless network with packet-based, IP (Internet Protocol) backbone in Italy. We continue to advance the next generation solutions completing a series of landmark third generation (3G) wireless calls, including the industry's first wireless packet data sessions using cdma2000 1XRTT in the quarter.
• Continued momentum for high-speed access solutions: Revenue growth was above 50 percent again this quarter over the same period last year with momentum across the portfolio. We further strengthened our position in the broadband dial access market with the acquisition of Promatory, a leading developer of next generation Digital Subscriber Line (DSL) platforms for high speed Internet access.
• First Mover Advantage in Emerging Markets and second wave of eBusiness: We announced that EINSTEINet will utilize our professional service capabilities to create their Internet data center infrastructure in Germany. We launched the Clarify eBusiness Applications unit, combining the recent acquisitions of Clarify and Periphonics with Nortel Networks' own capabilities in customer contact centers. It will provide enterprises and service providers with business-to-business (B2B) applications and services for managing customer relationships and building virtual Internet marketplaces.
• Ongoing streamlining initiatives: We announced the proposed outsourcing/divestiture of certain electronics manufacturing services to Solectron Corporation, the final phase of our operations streamlining strategy outlined in January 1999, and the agreement with PricewaterhouseCoopers to assume the operations of certain corporate services, including payroll, HR Info Centres and capital services.

"Comparing 2000 to 1999, we now see the overall market growing in the 20 percent range, up from our previous view of 14 to 15 percent. With our market leadership in a number of the high growth segments, strong order input with orders exceeding revenues again this quarter, and the incremental increases in revenues that will result from our majority owned position in certain joint ventures, we expect that our revenue growth in 2000 over 1999 will be in the 30 to 35 percent range, up from our previous view of 20 to 21 percent, and that our growth in EPS from operations in 2000 compared with 1999 will be around 30 percent," said John Roth.

Revenue Breakdown
Segment revenues for the first quarter of 2000 increased 64 percent for the Service Provider and Carrier ("SP&C") segment and increased 5 percent for the Enterprise segment over the same period in 1999.

SP&C segment revenues reflected strong growth in sales of both Optical Internet and mobility solutions in the United States, Europe and Latin America. Core switching sales were up significantly in the United States, Europe and Asia. Revenues from high speed Internet access solutions were also substantially higher in the United States, Europe and Asia, more than offsetting a decline in Canada.

Overall, Enterprise segment revenues were up in the first quarter of 2000 compared to the same period last year due to the consolidation of certain joint ventures beginning January 1, 2000. Strong growth in eBusiness application solutions sales in the United States and Europe partially offset a general decline in sales of enterprise voice and data networking infrastructure solutions.

Geographic revenues for the first quarter of 2000 compared to the same period in 1999 increased 54 percent in the United States, 46 percent outside the United States and Canada, and 4 percent in Canada.

Expenses
Selling, general and administrative ("SG&A") expenses in the first quarter of 2000 were US$1.19 billion, or 18.9 percent of revenue, compared with US$823 million, or 19.2 percent of revenue, in the first quarter of 1999. The SG&A expenses in the quarter reflected investments to support Nortel Networks global growth and operations systems to simplify and streamline business processes.

Research and development ("R&D") expenses were US$851 million, or 13.5 percent of revenue, in the first quarter of 2000, compared with US$683 million, or 15.9 percent of revenue, in the first quarter of 1999. The increased R&D expenses in the quarter reflected planned expenses in the SP&C and Enterprise segments focused on data networking and Optical Internet solutions.

Nortel Networks is a global leader in telephony, data, eBusiness, and wireless solutions for the Internet. The Company had 1999 U.S. GAAP revenues of US$21.3 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 make acquisitions and/or 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; the impact of consolidations in the telecommunications industry, the uncertainties of the Internet; stock market volatility; the ability of Nortel Networks to recruit and retain qualified employees; and the impact of increased provision of customer financing by Nortel Networks. 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" (purchased in-process research and development expense related to acquisitions, the amortization of acquired technology, and the amortization of goodwill from the acquisition of Bay Networks, Inc. ("Bay Networks") and all subsequent acquisitions) and one-time gains and charges.