2010년 3월 16일 화요일

펀기사 - Nortel Reports Financial Results for the Fourth Quarter and Full Year 2009

며칠 전에 Nortel의 실적이 발표되었네요.

이 부분을 보면 LG-Nortel의 실적도 들어 있습니다.

작년동안에는 약 7천억 매출에 6백억 정도 영업이익이 난 듯 합니다.

하지만 4분기로만은 영업이익이 적자전환 했네요.

내부적으로도 사실 말들이 많긴 합니다.

에릭슨과의 M&A도 좀 늦어지는 듯도 하고..

 

아래는 CNNMoney의 기사입니다.

http://money.cnn.com/news/newsfeeds/articles/marketwire/0596307.htm

 

=================================================================================

 

Financial Presentation
--  EMEA subsidiaries, and entities they control (Equity Investees),
    continue to be presented using the equity method of accounting
    --  financial position and results of operations of the Equity Investees
        presented net on a single line in the balance sheet and statement of
        operations, respectively, versus being combined gross into each
        individual line item
--  ES, NGS and DiamondWare businesses sold in Q4 2009 presented as
    discontinued operations
--  CDMA business sold in Q4 2009 reported as continuing operations, as did
    not qualify for presentation as discontinued operations
Financial Results
--  Fourth quarter consolidated Revenues of $794 million, which excludes
    fourth quarter revenues of $367 million related to Equity Investees and
    $300 million related to discontinued operations
--  Fourth quarter SG&A and R&D expenses of $307 million
    --  Excludes expenses of $128 million related to Equity Investees
    --  Includes $26 million related to workforce and other cost reduction
        activities and pension curtailment losses that historically would
        have been recorded in special charges
--  Consolidated cash balance as of December 31, 2009 was $2.0 billion and
    excluded Equity Investees cash of $815 million and restricted cash of
    $1.93 billion related to divestiture proceeds. The cash balance reported
    as of September 30, 2009 was $1.81 billion and excluded Equity Investees
    cash of $798 million
--  Completed the divestiture of CDMA business to Ericsson in the fourth
    quarter and recorded a gain of $1.20 billion
--  Completed the divestiture of ES, NGS and DiamondWare businesses to
    Avaya in the fourth quarter and recorded a gain in discontinued
    operations of $756 million
--  Focus remains on maximizing value for stakeholders, including creditors,
    customers and employees

Nortel(1) Networks Corporation (OTCBB: NRTLQ) announced its results for the fourth quarter and full year 2009. Results were prepared in accordance with United States generally accepted accounting principles (GAAP) in U.S. dollars.

As previously announced on November 16, 2009 following discussions with the U.S. Securities and Exchange Commission (SEC), Nortel no longer combines the results of the Europe, Middle East and Africa (EMEA) subsidiaries, and entities they control (Equity Investees), with its consolidated results. Nortel has determined that, as of the Petition Date, it is appropriate to present its Equity Investees under the equity method of accounting based on the conclusion that Nortel exercises significant influence over those entities. The equity method of accounting results in the financial position and results of operations of the Equity Investees being presented net on a single line in the balance sheet and statement of operations, respectively, versus being combined gross into each individual line item. The comparative periods have not been recast for this change in presentation. As a result, analysis using the comparative periods may be difficult, and may not provide meaningful comparisons.

The Enterprise Solutions (ES) business as well as the Nortel Government Solutions (NGS) and DiamondWare businesses are presented as discontinued operations for the fourth quarter and year ended December 31, 2009. Accordingly, comparative periods have been recast to give effect for the change in accounting.

The Code Division Multiple Access (CDMA) business did not qualify for treatment as discontinued operations and as a result is included in continuing operations.

Except in the Segment Revenues section, the discussion below relates to Results from Continuing Operations under U.S. GAAP and excludes the financial results of the Equity Investees. Consistent with the way we manage our business segments, the financial information in the Segment Revenues section includes the results from continuing operations of the Equity Investees within each segment. Therefore, in order to reconcile the financial information for the business segments discussed below to our consolidated financial information, the net financial results of the Equity Investees must be removed.

As part of Nortel's ongoing cost reduction activities, on March 11, 2010, Nortel Networks Corporation (NNC), Nortel Networks Limited (NNL), Nortel Networks Inc. and Nortel Networks Capital Corporation each filed a Form 15 related to their respective debt securities and all related guarantees, as applicable, reflecting the automatic suspension of reporting requirements under the U.S. Securities Exchange Act of 1934 (Act) as there were less than 300 holders of each series of securities as of January 1, 2010. NNL also intends to terminate the registration of its common stock under the Act shortly and suspend its obligations to file periodic reports with the SEC, including Forms 10-K, 10-Q and 8-K. Following the deregistration of its common shares, NNL will continue to be a "reporting issuer" under Canadian securities laws and, as a result, will remain subject to continuous disclosure requirements, including the filing of annual and quarterly financial statements and managements' discussion and analysis of financial results under applicable Canadian securities laws. NNC will continue to be a "reporting issuer" under both Canadian and U.S. securities laws and will continue to remain subject to applicable continuous disclosure requirement.

Financial Summary

Nortel's overall financial performance in the fourth quarter of 2009 was impacted by continued ongoing negative economic conditions and the uncertainty created by the Company's Creditor Protection Proceedings which resulted in a decrease in customers' spending levels, as well as the sale of the CDMA/LTE Access and Enterprise, NGS and DiamondWare businesses in December 2009.

--  Revenues in the fourth quarter of $794 million, with declines year over
    year in all segments and in all regions. These revenues exclude fourth
    quarter revenues related to Equity Investees of $367 million
    and $300 million related to discontinued operations. Full year revenues
    were $4.09 billion, with declines year over year in all segments and in
    all regions. These revenues exclude full year revenues related to Equity
    Investees of $1.46 billion and $1.37 billion related to
    discontinued operations. Total revenues were $2.07
    billion in the fourth quarter of 2008 and $7.62 billion for the full
    year 2008 excluding revenues related to discontinued operations of $650
    million the fourth quarter of 2008 and $2.80 billion for the full year
    2008.
--  Gross margin of 38.3 percent in the fourth quarter, a decrease of 2.7
    percentage points from the year ago quarter, and full year gross margin
    of 42.4 percent, an increase of 1.0 percentage point from full year
    2008, includes charges related to workforce and other cost reduction
    activities and pension curtailment losses that historically would have
    been recorded in special charges. Excluding these charges, gross margin
    would have been 39.4 percent(a) for the fourth quarter of 2009 and 43.5
    percent(a) for the full year 2009.
--  SG&A expense in the fourth quarter of $158 million, a decrease of 32.2
    percent from the year ago quarter and SG&A expense for the full year of
    $698 million, a decrease of 39.4 percent from 2008. Excluding $13
    million for the fourth quarter and $67 for the full year related to
    workforce and other cost reduction activities and pension curtailment
    losses that historically would have been recorded in special charges,
    SG&A for the fourth quarter would have decreased by 37.8 percent year
    over year(a) and for the full year would have decreased 45.2 percent
    from 2008(a). SG&A expense in the fourth quarter and full year excludes
    $112 million and $511 million, respectively, related to Equity
    Investees.
--  R&D expense in the fourth quarter of $149 million, a decrease of 36.9
    percent from the year ago quarter and R&D expense for the full year of
    $757 million, a decrease of 33.7 percent from 2008. Excluding $13
    million for the fourth quarter and $41 for the full year related to
    workforce and other cost reduction activities and pension curtailment
    losses that historically would have been recorded in special charges,
    SG&A for the fourth quarter would have decreased by 43.2 percent year
    over year(a) and for the full year would have decreased 37.2 percent
    from 2008(a). R&D expense in the fourth quarter and full year excludes
    $16 million and $118 million, respectively, related to Equity Investees.
--  Cash balance as of December 31, 2009 was $2.0 billion and excluded
    Equity Investees cash of $815 million and restricted cash of $1,928
    related to divestiture proceeds. The consolidated cash balance
    exceeded the September 30, 2009 consolidated cash balance of $1.81
    billion, which excluded Equity Investees cash of $798 million.

Segment Revenues

The financial information for our business segments includes the results of the Equity Investees as if they were consolidated, which is consistent with the way we manage our business segments, but does not include the results of discontinued operations. Commencing with the third quarter of 2009, Nortel began reporting its CVAS business unit as a separate reportable segment. Prior to that time, the results of CVAS were included in the Wireless Networks (WN) reportable segment, which prior to the third quarter of 2009 was called the Carrier Networks (CN) reportable segment.

Segment revenues were $1.1 billion for the fourth quarter of 2009 compared to $2.07 billion for the fourth quarter of 2008, reflecting a reduction of 49.2% percent due to declines across all business segments. The reduction was primarily a result of the continuing economic downturn, the uncertainty created by the Creditor Protection Proceedings, the recognition of previously deferred revenue in the fourth quarter of 2008 not repeated to the same extent in the fourth quarter of 2009 and the divestitures of the CDMA/LTE Access and Enterprise businesses in the fourth quarter of 2009.

                            Segment Revenues B/(W)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
                                             Q4 2009       YoY         QoQ
----------------------------------------------------------------------------
Wireless Networks                            $   375       (67%)       (43%)
Carrier VoIP and                             $   194       (27%)        (7%)
Application Solutions
Metro Ethernet Networks                      $   327       (29%)        11%
LGN                                          $   154       (24%)        50%
Other                                        $     2       100%          0%
----------------------------------------------------------------------------
  Total Segment Revenues                     $ 1,052       (49%)       (17%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Discontinued Operations (i)                  $   410       (37%)       (14%)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
(i) Includes revenues related to Equity Investees

WN revenues in the fourth quarter of 2009 were $375 million, a decrease of 67% percent compared with the year ago quarter and a decrease of 43% sequentially with declines in the GSM and UMTS solutions business and the CDMA solutions business. CDMA solutions revenues were impacted by the divestiture of the CDMA business in the fourth quarter of 2009. The wireless segment was also negatively impacted by a reduction in spending by certain customers as a result of their change in technology migration plans.

CVAS revenues in the fourth quarter of 2009 were $194 million, a decrease of 27% percent compared with the year ago quarter and a decrease of 7% sequentially primarily due to lower sales volumes.

Metro Ethernet Networks (MEN) revenues in the fourth quarter of 2009 were $327 million, a decrease of 29% percent compared with the year ago quarter and an increase of 11% sequentially. In addition to the overall factors above, lower revenues from certain customers also impacted the year over year decline.

LG-Nortel Co. Ltd. (LGN) revenues in the fourth quarter of 2009 were $154 million, a decrease of 24% percent compared with the year ago quarter and an increase of 50% sequentially. In addition to the overall factors described above, a majority of the year over year decline was in LGN Carrier, primarily due to higher sales volumes related to our 3G wireless products in the fourth quarter of 2008. The decrease was partially offset by network upgrades related to certain customers in the fourth quarter of 2009, as well as the impact of foreign exchange fluctuations.

Discontinued operations revenues in the fourth quarter of 2009 were $410 million, a decrease of 37% percent compared with the year ago quarter and a decrease of 14% sequentially. These reductions were primarily due to the divesture of the ES, NGS and DiamondWare businesses in the fourth quarter of 2009.

Gross Margin

Gross margin was 38.3 percent of revenues in the fourth quarter of 2009. Excluding charges related to workforce and other cost reduction activities and pension curtailment losses that historically would have been recorded in special charges, gross margin in the fourth quarter of 2009 would have been 39.4 percent(a) of revenues. This compared to gross margin of 41.0 percent for the fourth quarter of 2008 and 45.0 percent for the third quarter of 2009. Compared to the fourth quarter of 2008, in addition to the items already noted, gross margin decreased primarily as a result of the unfavorable impacts of product mix,foreign exchange fluctuations and price erosion.

Operating Expenses

                  Operating Expenses B/(W)
-----------------------------------------------------------
-----------------------------------------------------------
                                Q4 2009      YoY      QoQ
-----------------------------------------------------------
 SG&A                             $ 158       32%      (3%)
 R&D                              $ 149       37%      35%
-----------------------------------------------------------
Total Operating Expenses          $ 307       35%       9%
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------

A focus on reducing costs resulted in lower operating expenses compared to the year ago quarter. Operating expenses were $307 million in the fourth quarter of 2009 and $339 million for the third quarter of 2009. This compares to operating expenses of $469 million for the fourth quarter of 2008.

SG&A expenses were $158 million in the fourth quarter of 2009, compared to $233 million for the fourth quarter of 2008 and $155 million for the third quarter of 2009. Excluding charges related to workforce and other cost reduction activities and pension curtailment losses that historically would have been recorded in special charges, SG&A expenses for the fourth quarter of 2009 would have been $145 million(a). SG&A expense in the fourth quarter of 2009 excludes $112 million related to Equity Investees. Compared to the fourth quarter of 2008, in addition to the items already noted, SG&A was favorably impacted primarily by headcount reductions and lower spending levels across all categories including a reduction in sales and marketing investment in maturing technologies.

R&D expenses were $149 million in the fourth quarter of 2009, compared to $236 million for the fourth quarter of 2008 and $184 million for the third quarter of 2009. Excluding charges related to workforce and other cost reduction activities and pension curtailment losses that historically would have been recorded in special charges, R&D expenses for the fourth quarter of 2009 would have been $136 million(a). R&D expense in the fourth quarter of 2009 excludes $16 million related to Equity Investees. Compared to the fourth quarter of 2008, in addition to the items already noted, R&D was favorably impacted primarily by headcount reductions and the cancellation of certain R&D programs.

Net Earnings (Loss)

The Company reported net earnings in the fourth quarter of 2009 of $1.78 billion compared to a net loss of $2.14 billion in the fourth quarter of 2008 and a net loss of $508 million in the third quarter of 2009.

The net earnings in the fourth quarter of 2009 of $1.78 billion included a gain from discontinued operations of $689 million primarily related to the divestiture of the ES business to Avaya of $756 million, reorganization items of $1,263 million primarily related to the gain on the divestiture of the CDMA/LTE Access assets to Ericsson of $1,202, interest expense of $74 million, other charges of $59 million comprised in part by pension curtailment expense, $75 million in income tax expense and an expense of $1 million for earnings attributable to non-controlling interests (formerly minority interests), partially offset by other income - net of $35 million, comprised in part of a currency exchange gain of $18 million.

The net loss in the fourth quarter of 2008 of $2.14 billion included $959 million in income tax expense primarily attributable to the increase in valuation allowance against net deferred tax assets, a goodwill impairment charge of $910, loss from discontinued operations of $430, interest expense of $85 million, special charges of $85 million for headcount and other cost reduction activities, earnings of $2 million for earnings attributable to non-controlling interests (formerly minority interests) and other expense - net of $43 million, comprised primarily of a loss of $46 million due to changes in foreign exchange rates.

Cash

Consolidated cash balance as of December 31, 2009 was $2.0 billion and excluded Equity Investees cash of $815 million. The consolidated cash balance exceeded the September 30, 2009 consolidated cash balance of $1.8 billion, which excluded Equity Investees cash of $798 million. The increase in the consolidated cash balance was primarily due to: cash from operating activities of $114 million; cash provided by investing activities of $75 million mainly due to proceeds from sales of business offset by changes in restricted cash including restricted cash of $1,928 related to divestiture proceeds; partially offset by financing activities of $46 million primarily related to a capital repayment; and net unfavorable foreign exchange impacts of $1 million.

Full Year 2009 Results

For 2009, revenues were $4.09 billion compared to $7.62 billion for 2008. Nortel reported net earnings for 2009 of $488 million, compared to net loss of $5.80 billion for the year 2008.

Net loss for 2009 included the amortization of intangibles of $13 million, reorganization items of $979 million primarily related to the gain on the divestiture to Ericsson, income tax expense of $75 million, a currency exchange gain of $38 million, and net earnings from discontinued operations of $201 primarily related to the gain on the divestiture to Avaya of $756 million.

Net loss for 2008 included the amortization of intangibles of $21 million, special charges of $251 million, a gain on sale of business and assets of $11 million, a litigation settlement expense of $11 million, a currency exchange loss of $38 million, M&A related costs of $9 million, an investment impairment of $8 million, income tax expense of $3,193 million, a goodwill write-down of $1,571 million and a net loss from discontinued operations of $1,175.

As previously announced, Nortel does not expect that the Company's common shareholders or the NNL preferred shareholders will receive any value from the creditor protection proceedings and expects that the proceedings will result in the cancellation of these equity interests.

(a) Each of Gross Margin, SG&A Expense and R&D Expense, excluding the impact of charges in relation to headcount and other cost reduction activities and pension curtailment losses that historically would have been recorded in special charges, are non-GAAP measures. Nortel's management believes that these measures are meaningful measurements of operating performance and provide greater transparency to investors with respect to Nortel's performance and supplemental information used by management in its financial and operational decision making. These non-GAAP measures may also facilitate comparisons to Nortel's historical performance and competitors' operating results. These non- GAAP measures should be considered in addition to, but not as a substitute for, the information contained in Nortel's financial statements prepared in accordance with GAAP. These measures may not be synonymous to similar measurement terms used by other companies.

About Nortel

For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.

Certain statements in this press release may contain words such as "could", "expects", "may", "should", "will", "anticipates", "believes", "intends", "estimates", "targets", "plans", "envisions", "seeks" and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on Nortel's current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which Nortel operates. These statements are subject to important assumptions, risks and uncertainties that are difficult to predict, and the actual outcome may be materially different. Nortel's assumptions, although considered reasonable by Nortel at the date of this press release, may prove to be inaccurate and consequently Nortel's actual results could differ materially from the expectations set out herein.

Actual results or events could differ materially from those contemplated in forward-looking statements as a result of the following: (i) risks and uncertainties relating to the Creditor Protection Proceedings including: (a) risks associated with Nortel's ability to: stabilize the business and maximize the value of Nortel's businesses; obtain required approvals and successfully consummate pending and future divestitures; ability to satisfy transition services agreement obligations in connection with divestiture of operations; successfully conclude ongoing discussions for the sale of Nortel's other assets or businesses; develop, obtain required approvals for, and implement a court approved plan; resolve ongoing issues with creditors and other third parties whose interests may differ from Nortel's; generate cash from operations and maintain adequate cash on hand in each of its jurisdictions to fund operations within the jurisdiction during the Creditor Protection Proceedings; access the EDC Facility given the current discretionary nature of the facility, or arrange for alternative funding; if necessary, arrange for sufficient debtor-in-possession or other financing; continue to have cash management arrangements and obtain any further required approvals from the Canadian Monitor, the U.K. Administrators, the French Administrator, the Israeli Administrators, the U.S. Creditors' Committee, or other third parties; raise capital to satisfy claims, including Nortel's ability to sell assets to satisfy claims against Nortel; maintain R&D investments; realize full or fair value for any assets or business that are divested;

utilize net operating loss carryforwards and certain other tax attributes in the future; avoid the substantive consolidation of NNI's assets and liabilities with those of one or more other U.S. Debtors; attract and retain customers or avoid reduction in, or delay or suspension of, customer orders as a result of the uncertainty caused by the Creditor Protection Proceedings; maintain market share, as competitors move to capitalize on customer concerns; operate Nortel's business effectively under the new organizational structure, and in consultation with the Canadian Monitor, the U.S. Creditors' Committee and the U.S. Principal Officer and work effectively with the U.K. Administrators, French Administrator and Israeli Administrators in their respective administration of the EMEA businesses subject to the Creditor Protection Proceedings; continue as a going concern; actively and adequately communicate on and respond to events, media and rumors associated with the Creditor Protection Proceedings that could adversely affect Nortel's relationships with customers, suppliers, partners and employees; retain and incentivize key employees; retain, or if necessary, replace major suppliers on acceptable terms and avoid disruptions in Nortel's supply chain; maintain current relationships with reseller partners, joint venture partners and strategic alliance partners; obtain court orders or approvals with respect to motions filed from time to time; resolve claims made against Nortel in connection with the Creditor Protection Proceedings for amounts not exceeding Nortel's recorded liabilities subject to compromise; prevent third parties from obtaining court orders or approvals that are contrary to Nortel's interests; reject, repudiate or terminate contracts;

and (b) risks and uncertainties associated with: limitations on actions against any Debtor during the Creditor Protection Proceedings; the values, if any, that will be prescribed pursuant to any court approved plan to outstanding Nortel securities and, in particular, that Nortel does not expect that any value will be prescribed to the NNC common shares or the NNL preferred shares in any such plan; the delisting of NNC common shares from the NYSE; and the delisting of NNC common shares and NNL preferred shares from the TSX; and (ii) risks and uncertainties relating to Nortel's business including: the sustained economic downturn and volatile market conditions and resulting negative impact on Nortel's business, results of operations and financial position and its ability to accurately forecast its results and cash position; cautious capital spending by customers as a result of factors including current economic uncertainties; fluctuations in foreign currency exchange rates; any requirement to make larger contributions to defined benefit plans in the future; a high level of debt, arduous or restrictive terms and conditions related to accessing certain sources of funding; the sufficiency of workforce and cost reduction initiatives; any negative developments associated with Nortel's suppliers and contract manufacturers including Nortel's reliance on certain suppliers for key optical networking solutions components and on one supplier for most of its manufacturing and design functions; potential penalties, damages or cancelled customer contracts from failure to meet contractual obligations including delivery and installation deadlines and any defects or errors in Nortel's current or planned products; significant competition, competitive pricing practices, industry consolidation, rapidly changing technologies, evolving industry standards, frequent new product introductions and short product life cycles, and other trends and industry characteristics affecting the telecommunications industry; any material, adverse affects on Nortel's performance if its expectations regarding market demand for particular products prove to be wrong; potential higher operational and financial risks associated with Nortel's international operations; a failure to protect Nortel's intellectual property rights; any adverse legal judgments, fines, penalties or settlements related to any significant pending or future litigation actions; failure to maintain integrity of Nortel's information systems; changes in regulation of the Internet or other regulatory changes; and Nortel's potential inability to maintain an effective risk management strategy.

For additional information with respect to certain of these and other factors, see Nortel's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other securities filings with the SEC. Unless otherwise required by applicable securities laws, Nortel disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

(1)Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

Note that Nortel will not be hosting a teleconference/audio webcast to discuss fourth quarter 2009 results.

                         NORTEL NETWORKS CORPORATION
       (Under Creditor Protection Proceedings as of January 14, 2009)
         Condensed Consolidated Statements of Operations (unaudited)
       (U.S. GAAP; Millions of U.S. dollars, except per share amounts)
                             Three months ended         Twelve months ended
                     --------------------------------- ---------------------
                       December  September   December   December   December
                       31, 2009   30, 2009   31, 2008   31, 2009   31, 2008
                     --------------------------------- ---------------------
Revenues:
  Products            $     698  $     962  $   1,932  $   3,758  $   7,045
  Services                   96         83        139        330        578
                     --------------------------------- ---------------------
                            794      1,045      2,071      4,088      7,623
                     --------------------------------- ---------------------
Cost of revenues
  Products                  468        548      1,167      2,253      4,234
  Services                   22         27         55        103        230
                     --------------------------------- ---------------------
                            490        575      1,222      2,356      4,464
                     --------------------------------- ---------------------
Gross profit                304        470        849      1,732      3,159
                           38.3%      45.0%      41.0%      42.4%      41.4%
Selling, general and
 administrative
 expense                    158        155        233        698      1,152
Research and
 development expense        149        184        236        757      1,141
                     --------------------------------- ---------------------
Management operating
 margin                      (3)       131        380        277        866
                           -0.4%      12.5%      18.3%       6.8%      11.4%
Amortization of
 intangible assets            4          3          5         13         21
Special charges               -          -         85          -        251
Gain on sale of
 businesses and
 assets                       1         15         (1)         -        (11)
Goodwill impairment           -          -        910          -      1,571
Other operating
 expense (income) -
 net                         59         46         16        105         49
                     --------------------------------- ---------------------
Total operating
 expenses                   371        403      1,484      1,573      4,174
                     --------------------------------- ---------------------
Operating earnings
 (loss)                     (67)        67       (635)       159     (1,015)
Other income
 (expense) - net             35         60        (43)        48        (54)
Interest and dividend
 income                       -          -         15          -        110
Interest expense
  Long-term debt            (74)       (75)       (83)      (298)      (308)
  Other                       -          -         (2)        (1)       (14)
                     --------------------------------- ---------------------
Earnings (loss) from
 operations before
 reorganization
 items, income taxes,
 equity in net
 earnings of
 associated companies
 and Equity Investees      (106)        52       (748)       (92)    (1,281)
Reorganization items
 - net                    1,263       (223)         -        979          -
                     --------------------------------- ---------------------
Earnings (loss) from
 operations before
 incomes taxes and
 equity in net
 earnings of
 associated companies
 and Equity Investees     1,157       (171)      (748)       887     (1,281)
Income tax expense          (75)       (10)      (959)      (122)    (3,193)
                     --------------------------------- ---------------------
Earnings (loss) from
 continuing
 operations before
 equity in net
 earnings of
 associated companies
 and Equity Investees     1,082       (181)    (1,707)       765     (4,474)
Equity in net
 earnings (loss) of
 associated companies
 - net of tax                 1         (1)         -          -          2
Equity in net
 earnings (loss) of
 Equity Investee(a)           3       (159)         -       (445)         -
                     --------------------------------- ---------------------
Net earnings (loss)
 from continuing
 operations               1,086       (341)    (1,707)       320     (4,472)
Net earnings (loss)
 from discontinued
 operations - net of
 tax(b)                     689       (164)      (430)       201     (1,175)
                     --------------------------------- ---------------------
Net earnings (loss)       1,775       (505)    (2,137)       521     (5,647)
Income attributable
 to noncontrolling
 interests                    2         (3)         2        (33)      (152)
                     --------------------------------- ---------------------
Net earnings (loss)
 attributable to
 Nortel Networks
 Corporation          $   1,777  $    (508) $  (2,135) $     488  $  (5,799)
                     --------------------------------- ---------------------
                     --------------------------------- ---------------------
Average shares
 outstanding
 (millions) - Basic         499        499        498        499        498
Average shares
 outstanding
 (millions) - Diluted       535        498        499        535        498
Basic earnings (loss)
 per common share -
 continuing
 operations            $   2.18     ($0.69)    ($3.42) $    0.58     ($9.28)
Basic earnings (loss)
 per common share -
 discontinued
 operations            $   1.38     ($0.33)    ($0.86) $    0.40     ($2.36)
                     --------------------------------- ---------------------
Total basic earnings
 (loss) per common
 share                 $   3.56     ($1.02)    ($4.28) $    0.98    ($11.64)
                     --------------------------------- ---------------------
                     --------------------------------- ---------------------
Diluted earnings
 (loss) per common
 share - continuing
 operations            $   2.05     ($0.69)    ($3.42) $    0.58     ($9.28)
Diluted earnings
 (loss) per common
 share - discontinued
 operations            $   1.29     ($0.33)    ($0.86) $    0.38     ($2.36)
                     --------------------------------- ---------------------
Total diluted
 earnings (loss) per
 common share          $   3.34     ($1.02)    ($4.28) $    0.96    ($11.64)
                     --------------------------------- ---------------------
                     --------------------------------- ---------------------
(a) Nortel has determined that, as of the Petition Date, the presentation of
the Equity Investees under the equity method of accounting was more
appropriate based on the conclusion that Nortel exercises significant
influence over those entities. The equity method of accounting will result
in the financial position and results of operations of the Equity Investees
being presented net on a single line on the balance sheet and statement of
operations, respectively, versus being combined gross into each individual
line item.
The comparative periods have not been recast for this change in accounting.
As a result, meaningful analysis to the comparative periods may be
difficult.
(b) The ES business as well as the shares of NGS and DiamondWare are
presented as discontinued operations beginning with the quarter ended
September 30, 2009.
Accordingly, comparative periods have been recast to give effect for the
changes in presentation.
                         NORTEL NETWORKS CORPORATION
       (Under Creditor Protection Proceedings as of January 14, 2009)
              Condensed Consolidated Balance Sheets (unaudited)
       (U.S. GAAP; Millions of U.S. dollars, except per share amounts)
                                 -------------------------------------------
                                     December       December       December
                                     31, 2009       31, 2008       31, 2007
                                 -------------  -------------  -------------
              ASSETS
Current assets
  Cash and cash equivalents       $     1,998    $     2,397    $     3,532
  Short-term investments                   18             65              -
  Restricted cash and cash
   equivalents                             92             36             76
  Accounts receivable - net               625          2,154          2,583
  Inventories - net                       183          1,477          2,002
  Deferred income taxes - net              24             44            487
  Other current assets                    348            455            467
  Assets held for sale                    272              -              -
  Assets of discontinued
   operations                             148              -              -
                                 -------------  -------------  -------------
Total current assets                    3,708          6,628          9,147
Restricted cash                         1,928              -              -
Investments                               117            127            194
Plant and equipment - net                 688          1,272          1,532
Goodwill                                    9            180          2,559
Intangible assets - net                    51            143            213
Deferred income taxes - net                10             12          2,868
Other assets                              177            475            555
                                 -------------  -------------  -------------
Total assets                      $     6,688    $     8,837    $    17,068
                                 -------------  -------------  -------------
                                 -------------  -------------  -------------
   LIABILITIES AND SHAREHOLDERS'
               DEFICIT
Current liabilities
  Trade and other accounts
   payable                        $       294    $     1,001    $     1,187
  Payroll and benefit-related
   liabilities                            128            453            690
  Contractual liabilities                  93            213            272
  Restructuring liabilities                 4            146            100
  Other accrued liabilities               660          2,674          3,825
  Long-term debt due within one
   year                                     -             19            698
  Liabilities held for sale               205              -              -
  Liabilities of discontinued
   operations                             182              -              -
                                 -------------  -------------  -------------
Total current liabilities               1,566          4,506          6,772
Long-term liabilities
Long-term debt                             41          4,501          3,816
Net liability in Equity
 Investee                                 534              -              -
Deferred income taxes - net                 7             11             17
Other liabilities                         226          2,948          2,875
                                 -------------  -------------  -------------
Total long-term liabilities               808          7,460          6,708
Liabilities subject to
 compromise                             7,358              -              -
                                 -------------  -------------  -------------
Total liabilities                       9,732         11,966         13,480
                                 -------------  -------------  -------------
      SHAREHOLDERS' DEFICIT
Common shares, without par
 value - Authorized shares:
 unlimited;                            35,604         35,593         34,028
  Issued and outstanding shares:
   497,941,038 as of March 31,
   2009
    498,020,417 as of March 31,
    2009 and 497,893,086 as of
    December 31, 2008
Additional paid-in capital              3,623          3,547          5,025
Accumulated deficit                   (41,876)       (42,362)       (36,532)
Accumulated other comprehensive
 income                                (1,124)          (729)           237
                                 -------------  -------------  -------------
Total Nortel Networks
 Corporation shareholders'
 deficit                               (3,773)        (3,951)         2,758
                                 -------------  -------------  -------------
Noncontrolling interest                   729            822            830
                                 -------------  -------------  -------------
Total shareholders' deficit            (3,044)        (3,129)         3,588
                                 -------------  -------------  -------------
Total liabilities and
 shareholders' deficit            $     6,688    $     8,837    $    17,068
                                 -------------  -------------  -------------
                                 -------------  -------------  -------------
                     NORTEL NETWORKS CORPORATION
    (Under Creditor Protection Proceedings as of January 14, 2009)
          Condensed Consolidated Statements of Cash Flows
              (U.S. GAAP; Millions of U.S. dollars)
                                 Three months ended     Twelve months ended
                  ---------------------------------  ----------------------
                     December  September   December     December   December
                     31, 2009   30, 2009   31, 2008     31, 2009   31, 2008
                  ---------------------------------  ----------------------
Cash flows from
 (used in)
 operating
 activities
  Net loss         $    1,777  $    (508) $  (2,135)   $     488  $  (5,799)
  Net loss from
   discontinued
   operations      $     (689) $     164  $     430    $    (201) $   1,175
  Adjustments to
   reconcile net
   earnings (loss)
   to net cash
   from (used in)
   operating
   activities, net
   of effects from
   acquisitions and
   divestitures of
   businesses:
    Amortization
     and
     depreciation          34         45         60          191        280
    Goodwill
     impairment             -          -        910            -      1,571
    Non-cash
     portion of
     cost
     reduction
     activities             -         10          5           18         18
    Equity in net
     earnings of
     associated
     companies -
     net of tax            (1)         -         (1)           -         (3)
    Equity in net
     earnings of
     Equity
     Investee              (3)       159          -          445          -
    Share-based
     compensation
     expense              (30)         -        (15)          56         49
    Deferred
     income taxes          (6)         1        940           16      3,053
    Pension and
     other
     accruals             107        132         44          264        129
    Loss (gain) on
     sales or
     write downs
     of
     investments,
     businesses
     and assets -
     net                    -         13        (11)           1         (1)
    Non-
     controlling
     interests             (2)         3         (2)          33        152
    Reorganization
     items             (1,323)       203          -       (1,058)         -
    Other - net           876       (249)       (56)         347       (480)
    Change in
     operating
     assets and
     liabilities,
     excluding
     Global Class
     Action
     Settlement -
     net                  297        143       (280)         676       (740)
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   operating
   activities of
   continuing
   operations           1,037        116       (111)       1,276       (596)
  Net cash from
   (used in)
   operating
   activities of
   discontinued
   operations            (923)         8         22         (941)        29
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   operating
   activities             114        124        (89)         335       (567)
                  ---------------------------------  ----------------------
Cash flows from
 (used in)
 investing
 activities
  Expenditures for
   plant and
   equipment               (8)        (9)       (22)         (40)      (126)
  Proceeds on
   disposals of
   plant and
   equipment                9          -          -           96          -
  Change in
   restricted cash
   and cash
   equivalents         (1,901)       (39)        16       (1,983)        39
  Decrease
   (increase) in
   short-term and
   long-term
   investments              6          -        286           46        (76)
  Acquisitions of
   investments and
   businesses -
   net of cash
   acquired                (1)        (1)        (2)          (2)       (75)
  Proceeds from
   sales of
   investments and
   businesses and
   assets - net         1,085          -         15        1,091        (11)
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   investing
   activities of
   continuing
   operations            (810)       (49)       293         (792)      (249)
  Net cash from
   (used in)
   investing
   activities of
   discontinued
   operations             885         (1)        (9)         898        (61)
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   investing
   activities              75        (50)       284          106       (310)
                  ---------------------------------  ----------------------
Cash flows from
 (used in)
 financing
 activities
  Dividends paid
   by subsidiaries
   to non-
   controlling
   interests                -          -         (5)          (6)       (35)
  Capital
   repayment to
   minority owners        (42)         -        (36)         (71)       (36)
  Increase in
   notes payable           15         13         61           51        177
  Decrease in
   notes payable          (17)       (13)       (31)         (93)      (138)
  Proceeds from
   issuance of
   long-term debt           -          -          -            -        668
  Repayment of
   long-term debt           -          -          -            -       (675)
  Debt issuance
   Cost                     -          -          -            -        (13)
  Decrease in
   capital leases
   payable                 (2)        (2)        (5)          (9)       (21)
  Other financing
   activities               -          -          -            -          -
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   financing
   activities of
   continuing
   operations             (46)        (2)       (16)        (128)       (73)
  Net cash from
   (used in)
   financing
   activities of
   discontinued
   operations               -          -          -           (1)        (1)
                  ---------------------------------  ----------------------
  Net cash from
   (used in)
   financing
   activities             (46)        (2)       (16)        (129)       (74)
                  ---------------------------------  ----------------------
Effect of foreign
 exchange rate
 changes on cash
 and cash
 equivalents               (1)        41        (86)          50       (184)
                  ---------------------------------  ----------------------
Net cash from
 (used in)
 continuing
 operations               180        106         80          406     (1,102)
Net cash from
 (used in)
 discontinued
 operations               (38)         7         13          (44)       (33)
                  ---------------------------------  ----------------------
Net increase
 (decrease) in
 cash and cash
 equivalents              142        113         93          362     (1,135)
Cash and cash
 equivalents at
 beginning of
 period, net            1,856      1,743      2,304        2,397      3,532
Less: Cash and
 cash equivalents
 of Equity
 Investees                  -          -          -         (761)         -
                  ---------------------------------  ----------------------
Cash and cash
 equivalents at
 beginning of
 period                 1,856      1,743      2,304        1,636      3,532
                  ---------------------------------  ----------------------
Cash and cash
 equivalents at
 end of period          1,998      1,856      2,397        1,998      2,397
Less: Cash and
 cash equivalents
 at end of period
 of discontinued
 operations                 -        (38)       (44)           -        (44)
                  ---------------------------------  ----------------------
Cash and cash
 equivalents at
 end of period     $    1,998 $    1,818 $    2,353   $    1,998 $    2,353
                  ---------------------------------  ----------------------
                  ---------------------------------  ----------------------
                      NORTEL NETWORKS CORPORATION
       (Under Creditor Protection Proceedings as of January 14, 2009)
             Consolidated Financial Information (unaudited)
                  (U.S. GAAP; Millions of U.S. dollars)
Segmented revenues
The following table summarizes our revenue and management operating margin
by segment. The financial information for segments includes the results of
the Equity Investees as if they were consolidated, which is consistent with
the way we manage our business segments.
                                 Three months ended     Twelve months ended
                  ---------------------------------  ----------------------
                     December  September   December     December   December
                     31, 2009   30, 2009   31, 2008     31, 2009   31, 2008
                  ---------------------------------  ----------------------
Segment Revenues
Wireless Networks  $      375   $    663   $  1,143   $    2,363   $  3,757
Carrier VoIP and
 Application
 Systems                  194        208        267          734        872
Metro Ethernet
 Networks                 327        295        458        1,315      1,713
LG-Nortel                 154        103        202          644      1,274
                  ---------------------------------  ----------------------
Total reportable
 segments               1,050      1,269      2,070        5,056      7,616
Other                       2          2          1            9          7
                  ---------------------------------  ----------------------
Total segment
 revenues               1,052      1,271      2,071        5,065      7,623
Less: Equity
 Investees
 revenues          $     (258)  $   (226)  $      -   $     (977)  $      -
                  ---------------------------------  ----------------------
Total consolidated
 revenues          $      794   $  1,045   $  2,071   $    4,088   $  7,623
                  ---------------------------------  ----------------------
                  ---------------------------------  ----------------------
Management
 Operating Margin
Wireless Networks          93        195        352          568        766
Carrier VoIP and
 Application
 Systems                   23         20         16           18        (38)
Metro Ethernet
 Networks                  35         12          9          116         72
LG-Nortel                 (11)         4         20           59        341
                  ---------------------------------  ----------------------
Total reportable
 segments                 140        231        397          761      1,141
Other                    (169)      (214)       (17)        (797)      (275)
                  ---------------------------------  ----------------------
Total Management
 Operating Margin         (29)        17        380          (36)       866
                        -2.76%      1.34%     18.35%
Impact of
 deconsolidation
 of Equity
 Investees                (26)      (114)         -         (313)         -
Amortization of
 intangible assets          4          3          5           13         21
Goodwill
 impairment                 -          -        910            -      1,571
Special charges             -          -         85            -        251
Loss (gain) on
 sales of
 businesses and
 assets                     1         15         (1)           -        (11)
Other operating
 expense (income)
 - net                     59         46         16          105         49
                  ---------------------------------  ----------------------
Total operating
 earnings (loss)          (67)        67       (635)         159     (1,015)
Other income
 (expense) - net           35         60        (43)          48        (54)
Interest and
 dividend income            -          -         15            -        110
Interest expense          (74)       (75)       (85)        (299)      (322)
Reorganization
 items - net            1,263       (223)         -          979          -
Income tax expense        (75)       (10)      (959)        (122)    (3,193)
Equity in net
 earnings of
 associated
 companies - net
 of tax                     1         (1)         -            -          2
Equity in net loss
 of Equity
 Investees                  3       (159)         -         (445)         -
                  ---------------------------------  ----------------------
Net earnings
 (loss)
 attributable to
 Nortel Networks
 Corporation from
 continuing
 operations        $    1,086   $   (341)  $ (1,707)   $     320 $   (4,472)
                  ---------------------------------  ----------------------
                  ---------------------------------  ----------------------
Geographic revenues
The following table summarizes our geographic revenues based on the location
of the customer for:
                                 Three months ended     Twelve months ended
                  ---------------------------------  ----------------------
                     December  September   December     December   December
                     31, 2009   30, 2009   31, 2008     31, 2009   31, 2008
                  ---------------------------------  ----------------------
Revenues
United States      $      403 $      736 $    1,056   $    2,389 $    3,062
EMEA (a)                   16         10        425           46      1,615
Canada                     97         82        137          335        499
Asia                      222        162        354        1,062      1,993
CALA (b)                   56         55         99          256        454
                  ---------------------------------  ----------------------
Total revenues     $      794 $    1,045 $    2,071   $    4,088 $    7,623
                  ---------------------------------  ----------------------
                  ---------------------------------  ----------------------
(a)  Europe, Middle East and Africa
(b)  Caribbean and Latin America

Network Solutions revenues

The following table summarizes our revenue by segment. The financial information for our business segments includes the results of the Equity Investees as if they were consolidated, which is consistent with the way we manage our business segments.

                                 Three months ended     Twelve months ended
                  ---------------------------------  ----------------------
                     December  September   December     December   December
                     31, 2009   30, 2009   31, 2008     31, 2009   31, 2008
                  ---------------------------------  ----------------------
Revenues
Wireless Networks
  CDMA solutions   $      174   $    452   $    831   $    1,574 $    2,364
  GSM and UMTS
   solutions              201        211        312          789      1,393
                  ---------------------------------  ----------------------
                          375        663      1,143        2,363      3,757
Carrier VoIP and
 Application
 Systems
  Circuit and
   packet voice
   solutions              194        208        267          734        872
                  ---------------------------------  ----------------------
                          194        208        267          734        872
Metro Ethernet
 Networks
  Optical
   networking
   solutions              244        241        357        1,025      1,312
  Data networking
   and security
   solutions               83         54        101          290        401
                  ---------------------------------  ----------------------
                          327        295        458        1,315      1,713
LG-Nortel
  LGN Carrier              96         55        153          458      1,015
  LGN Enterprise           58         48         49          186        259
                  ---------------------------------  ----------------------
                          154        103        202          644      1,274
Other                       2          2          1            9          7
                  ---------------------------------  ----------------------
Total revenues     $    1,052   $  1,271   $  2,071   $    5,065 $    7,623
                  ---------------------------------  ----------------------
                  ---------------------------------  ----------------------
Contacts:
Nortel
Jamie Moody
972-684-7167
moodyjam@nortel.com
www.nortel.com

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