· Revenues up 42% to US$7.3 Billion
· EPS from Operations up 64% to US$0.18
· Outlook for 2000 and 2001 Remains Strong

BRAMPTON, ONT. - Nortel Networks* Corporation(a) [NYSE/TSE: NT] reported results for the third quarter and first nine months of 2000 prepared in accordance with U.S. generally accepted accounting principles.

Revenues increased 42 percent to US$7.31 billion for the third quarter of 2000 from US$5.15 billion in the same period in 1999. Net earnings from operations applicable to common shares(b) for the quarter were US$574 million, or US$0.18 per share on a diluted basis, compared to US$314 million, or US$0.11 per share on a diluted basis, for the same period in 1999, an increase in earnings per share from operations of 64 percent. Including Acquisition Related Costs (b), stock option compensation from acquisitions and divestitures and one-time gains, Nortel Networks recorded a net loss applicable to common shares in the third quarter of 2000 of US$586 million or US$0.20 per share.

"We are extremely pleased with the strong growth in the quarter which reflected our continued strength and leadership in the key growth areas of Optical Internet, Wireless Internet, Local Internet and eBusiness Solutions," said John Roth, president and chief executive officer, Nortel Networks. "Carriers and service providers around the world continued the drive to provide a broad range of wireless, internet and eBusiness services to their customers. Leading the growth again this quarter, revenues for our Optical Internet solutions grew nearly 90% in the quarter compared to the same period last year. We are especially pleased with the excellent traction in Wireless Internet solutions with approximately US$1.2 billion in new contract announcements since the end of June and revenue growth in excess of 50% in the quarter over third quarter of 1999. Local Internet and eBusiness solutions also continued to do well with quarterly revenue growth in excess of 35% and 200% respectively over the same period last year."

"We also made good progress in the quarter with our Optical capacity investments. Optical systems capacity continued to come on stream as planned and has restored customer lead times to more traditional levels. We made significant progress in ramping up our optical components business, both to leverage the market opportunity and to ensure that a strong second source will be available to meet our needs."

"Based on the momentum we have experienced during the first nine months and the strong order backlog, we continue to expect that our percentage revenue growth in 2000 over 1999 will be in the low 40's. Consistent with our overall expectations for the year is an expectation that Optical Internet solutions revenues will exceed US$10 billion. We now expect however, that our percentage growth in EPS from operations in 2000 compared with 1999 will also be in the low 40's, up from our previously stated expectation which was in the high 30's."

"Looking forward to 2001, we expect the overall market to grow in excess of 20 percent. Given our strong market position and industry leading networking solutions, we expect to continue to grow significantly faster than the market, with anticipated growth in revenues and EPS from operations in the 30 to 35 percent range," said John Roth.

Revenue Breakdown
Segment revenues for the third quarter of 2000 increased 54 percent for the Service Provider and Carrier ("SP&C") segment and increased 6 percent for the Enterprise segment over the same period in 1999.

SP&C segment revenues reflected strong growth in sales of Optical Internet and mobility solutions across our major geographic regions. Core switching sales were also up significantly in the United States, Europe and Latin America. Revenues from High Speed Local Internet solutions were up significantly in Asia, Europe and Latin America, more than offsetting a modest decline in the United States.

Overall, Enterprise segment revenues were up in the third 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, Europe and Asia was partially offset by a decline in sales of enterprise voice and data networking infrastructure solutions in the United States and Asia.

Geographic revenues for the third quarter of 2000 compared to the same period in 1999 increased 66 percent outside the United States and Canada, 31 percent in the United States, and 25 percent in Canada.

Nine Month Results
For the first nine months of 2000, revenues increased 46 percent to US$21.46 billion from US$14.71 billion for the same period in 1999. Net earnings from operations applicable to common shares (b) for the first nine months of 2000 were US$1.48 billion, or US$0.48 per share on a diluted basis, compared to US$827 million, or US$0.30 per share on a diluted basis, for the same period in 1999, an increase in earnings per share from operations of 60 percent. Including Acquisition Related Costs (b) , stock option compensation from acquisitions and divestitures, and one-time gains and charges, Nortel Networks recorded a net loss of US$2.06 billion, or US$0.71 per share, for the first nine months of 2000.

Expenses
"Our efforts in the first nine months have been focused on building capacity to meet customer demand. Going forward we will balance these efforts to drive greater efficiency by continuing to attack complexity and eliminating redundancies in our business," said Frank Dunn, chief financial officer, Nortel Networks.

Selling, general and administrative ("SG&A") expenses(c) in the third quarter of 2000 were US$1.38 billion, or 18.9 percent of revenue, compared with US$926 million, or 18.0 percent of revenue, in the third quarter of 1999. The SG&A expenses in the quarter reflected investments to support Nortel Networks global growth.

Research and development ("R&D") expenses were US$1.02 billion, or 13.9 percent of revenue, in the third quarter of 2000, compared with US$767 million, or 14.9 percent of revenue, in the third quarter of 1999. The increased R&D expenses in the quarter reflected planned expenses in optical, mobility, high performance network architecture and eBusiness solutions.

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 and the Globemark are trademarks of Nortel Networks.

(a) On May 1, 2000, Nortel Networks Corporation acquired all of the outstanding common shares of Nortel Networks Limited (formerly called Nortel Networks Corporation) by way of a Canadian court-approved plan of arrangement. Nortel Networks Limited has preferred shares outstanding which are publicly traded. Nortel Networks Limited's financial results have been consolidated into the results reported for Nortel Networks Corporation. Holders of Nortel Networks Limited preferred shares will receive separate financial disclosure from Nortel Networks Limited in accordance with the requirements of applicable law.
(b) Net earnings from operations applicable to common shares is defined as reported net earnings applicable to common shares before "Acquisition Related Costs" (in-process research and development expense, the amortization of acquired technology and goodwill from the August 1998 acquisition of Bay Networks, Inc. ("Bay Networks") and all subsequent acquisitions), stock option compensation from acquisitions/divestitures, and one-time gains and charges.
(c) Excludes one time charges.