BOSTON, Mass. and PALO ALTO, Calif. - Nortel Networks* [NYSE/TSE: NT], a global leader in Optical Internet and Local Internet, and Hewlett-Packard Company [NYSE: HWP], the leader in always-on Internet infrastructure, intend to work together to integrate Nortel Networks high-bandwidth optical networking technology with Internet infrastructure from HP to provide a key enabling component for the high-performance Optical Internet data center.

The two companies plan to create an open and interoperable framework that can reduce Internet data center bottlenecks. With this framework, the two companies expect to position service providers to offer higher performance content and eBusiness services, facilitating personalized e-commerce, broadcast-quality streaming media and Internet collaboration.

At Networld+Interop in Atlanta last month, Nortel Networks and HP demonstrated a connectivity breakthrough for reducing Internet congestion with the seamless integration of next generation computing platforms and dense wave division multiplexing (DWDM) optical network technology over 10 gigabits per second (gbps) Ethernet.

The two companies expect to explore joint commercial development of a 10 gbps Ethernet solution, including a 10 gbps Network Interface Card (NIC) to be housed in the recently announced HP Superdome and other selected HP9000 servers. Nortel Networks and HP are each also continuing to investigate other key technologies that will enable the high-performance Optical Internet data center.

The 10 gbps Ethernet solution will be designed to scale to provide the higher bandwidth capacity necessary to support the next wave in eBusiness services. This high-bandwidth technology will eliminate the costly congestion caused by multiple router hops within traditional Internet data centers, create economies of scale, and simplify data center architecture and management.

"Our customers are hungry for a new optical-based infrastructure that will tightly couple the network and the server with end-to-end service management to deliver higher service levels and reduce costs," said Richard Caruso, president, Application Service Provider Market Segment, Nortel Networks. "Working with HP, we plan to extend the Optical Internet into the data center directly to the source of Internet content."

"This will be truly disruptive technology," Caruso said. "Nortel Networks looks forward to migrating our optical network and Internet data center customers to this new, high-performance model, and to new content and eBusiness services as another building block in our Local Internet capabilities."

Internet data center infrastructure is expected to represent a US$18 billion market by 2003 according to IDC**, which also estimates that service providers will build approximately 740 Internet data centers over the next three years. These Internet data centers are needed to house the assets of enterprises, Application Service Providers (ASPs) and Web hosting service providers (HSPs), all of whom are currently challenged in meeting the performance needs of their customers and users.
"As service providers strive to relieve the pressure of Internet congestion, it will become increasingly important to deploy powerful, always-on Internet infrastructure solutions that support high intensity eBusiness and content services," said Sebastiano Tevarotto, vice president and general manager, HP Network and Service Provider Business Unit. "HP is excited to be working with Nortel Networks to integrate high-bandwidth optical pipes directly into HP's next generation servers, allowing service providers and large-scale enterprises to offer a significantly enhanced end-user experience."

Other elements within this new data center model are expected to include optically enabled storage and content networks as well as centralized service management. Residing above the infrastructure, the combination of HP OpenView and Nortel Networks Preside* Managed Applications Services platform will provide integrated, end-to-end service management capabilities to ensure superior reliability and performance. Centralized management will drive new economies of scale, allowing service providers to more efficiently manage geographically dispersed data centers as one logical, virtual and global entity. Critical network and computing resources can then be allocated to where they are needed most.

Additional activities proposed to be undertaken by Nortel Networks and HP are subject to execution of definitive agreements.

HP offers always-on Internet infrastructure solutions for service providers with the industry's broadest portfolios of products and services, including high-performance UNIX*, NT, and Linux platform servers, direct and network storage solutions, HP Praesidium security, highly available and scalable data center L2/L3 Ethernet switching, instant Capacity on Demand, HP OpenView service management and HP e-speak service brokering infrastructure.

Hewlett-Packard Company - a leading provider of computing and imaging solutions and services - is focused on making technology and its benefits accessible to individuals and businesses through simple appliances, useful e-services and an Internet infrastructure that's always on. HP has 86,000 employees worldwide and had total revenue from continuing operations of US$42.4 billion in its 1999 fiscal year. Information about HP and its products can be found on the World Wide Web at http://www.hp.com.
Nortel Networks pre-integrated and certified Internet data center solution includes networking infrastructure, the Preside Managed Applications Services platform and other operations support system (OSS) capabilities, as well as comprehensive global professional services. Nortel Networks has also recently acquired Alteon* WebSystems, the leader in content switching and server load balance switches, which are widely deployed by market-leading hosting providers.

Nortel Networks is a global Internet and communications leader with capabilities spanning Optical, Wireless, Local Internet and eBusiness. 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, promising 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.

* Nortel Networks, the Nortel Networks logo, the Globemark, Preside and Alteon are trademarks of Nortel Networks. UNIX is a registered trademark of the Open Group.
** Web Hosting Services: Market Review and Forecast, 1998-2003, IDC, December 1999.