EPiCON has developed innovative software that enables application service providers (ASPs) to profitably deploy, install, manage, and update software to thousands of desktops from a central server. EPiCON's software will become a part of Nortel Networks Preside* Managed Application Services Platform (see separate news release issued today), an open and extendable software-based solution that will enable service providers to quickly and cost-effectively roll out and manage multiple eBusiness and other software applications for their customers. This breakthrough solution will benefit service providers through enhanced operational efficiencies, while scores of end users will enjoy cost-effective and high performance access to a broad new set of software applications.

The ASP market is poised to grow rapidly and Nortel Networks will be further accelerating this growth by providing solutions that deliver new revenue and profit opportunities to service providers. The Preside Managed Application Services Platform will give Nortel Networks the first-mover advantage with an application and service management solution for this dynamic market. By renting software applications instead of purchasing them, businesses can save thousands of dollars per desktop by slashing the costs of software, desktop hardware, and IT services. Analyst firm Gartner Group forecasts that the ASP market is set to grow to US$23 billion in 2003 from about US$900 million in 1998, a compound annual growth rate of 91 percent a year.

"Robust end-to-end service and application management is a missing element in the ASP and hosting models and the key required to unlock the profit potential of this emerging market," said Richard Caruso, president, ASP Market. "To manage the distribution of hundreds of software applications to millions of desktops, the network needs to get smarter. The Preside Managed Application Services Platform and EPiCON's software will give the network the intelligence and management capability that the ASP model has been searching for, so that service providers can cost effectively scale their businesses and deliver a complete suite of eBusiness and enterprise applications to companies of all sizes."

Based in Chelmsford, Massachusetts, EPiCON was founded in 1997 and has 60 employees. It has both enterprise and service provider customers. EPiCON will become part of Nortel Networks ASP Market business unit.

"Nortel Networks has the vision of where the ASP market is going, and a strategy to take it there," said Jack Sweeney, EPiCON president and CEO. "We see this acquisition as the ideal way to bring our technology to the global marketplace and accelerate the mass market adoption of application services."

EPiCON's unique technology, which extends application management all the way to the desktop, will be a key differentiator in Nortel Networks' overall operations support system (OSS) for the ASP and hosting markets. The technology will enable service providers to deliver applications to the desktop, assure their operation with self-healing capabilities, and automatically handle software distribution and revision control to Windows-based desktops. It will be compatible with leading systems management tools and complements the Nortel Networks ASP and hosting portfolio comprised of network and Internet Data Center infrastructure, hosted applications, professional services and Nortel Networks Preside service and network management.

Nortel Networks currently owns nine percent of EPiCON on a fully-diluted basis, following a minority investment last year. The transaction, which is expected to close in the late third quarter or early fourth quarter of 2000, is subject to customary regulatory approvals and approval by EPiCON's shareholders. The acquisition (excluding acquisition related costs) is expected to be neutral to Nortel Networks earnings per share from operations in calendar years 2000 and 2001. Based upon a determined price of Nortel Networks common share of approximately US$55.15, the acquisition will result in Nortel Networks issuing approximately 4.99 million shares on a fully-diluted basis.

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.