Nortel Acquires Tasman Networks to Strengthen End-to-End Convergence Solutions

DECEMBER 27, 2005, TORONTO - Nortel* [NYSE/TSX: NT] has enhanced its ability to deliver end-to-end converged enterprise networks with the agreement to acquire Tasman Networks, an established networking company that provides a portfolio of secure, high-performance enterprise routers. Under the terms of the agreement, Nortel will pay U.S. $99.5 million in cash for Tasman Networks. The acquisition is anticipated to close in the first quarter of 2006 and is subject to customary closing conditions.

“With the acquisition of Tasman Networks, Nortel will strengthen its position as an innovator in providing resilient end-to-end converged, secure IP telephony and multimedia networks,” said Steve Slattery, president, Enterprise Solutions and Packet Networks, Nortel. “We anticipate that the Tasman products will complement our enterprise infrastructure solutions and further our ability to provide seamless, feature-rich networks that support critical real-time applications - including voice, video, and streaming multimedia applications.”

San Jose, California based Tasman Networks founded in 1997, delivers high-performance, wide-area network IP routers that are designed to offer simplified deployment and provide a more cost-effective investment for companies. They are planned to augment Nortel’s convergence solutions for data and IP multimedia customers and are planned to be marketed as part of Nortel’s Secure Router line.

This portfolio, aimed at small to medium-sized branch office deployments, is designed to provide full routing and multicast services; and is uniquely capable of running numerous services such as voice, VPN, firewall, and quality of service simultaneously with wire-speed performance. This capability is crucial to converging network services onto one platform and is designed to provide full bandwidth from the network consistently.

Nortel is the only company to have deployed more than 50 million enterprise telephony lines in addition to 50 million Ethernet ports, demonstrating the company’s leadership in delivering converged network solutions. Nortel’s IP multimedia solutions serve customers of all sizes in all industries around the world.

About Nortel

Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Serving both service provider and enterprise customers, Nortel delivers innovative technology solutions encompassing end-to-end broadband, Voice over IP, multimedia services and applications, and wireless broadband designed to help people solve the world’s greatest challenges. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.

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 outcome of regulatory and criminal investigations and civil litigation actions related to Nortel’s restatements and the impact any resulting legal judgments, settlements, penalties and expenses could have on Nortel’s results of operations, financial condition and liquidity, and any related potential dilution of Nortel’s common shares; the findings of Nortel’s independent review and implementation of recommended remedial measures; the outcome of the ongoing independent review with respect to revenues for specific identified transactions, which review will have a particular emphasis on the underlying conduct that led to the initial recognition of these revenues; the restatement or revisions of Nortel’s previously announced or filed financial results and resulting negative publicity; the existence of material weaknesses in Nortel’s internal control over financial reporting and the conclusion of Nortel’s management and independent auditor that Nortel’s internal control over financial reporting is ineffective, which could continue to impact Nortel’s ability to report its results of operations and financial condition accurately and in a timely manner; the impact of Nortel’s and NNL’s failure to timely file their financial statements and related periodic reports, including Nortel’s inability to access its shelf registration statement filed with the United States Securities and Exchange Commission (SEC); the impact of management changes, including the termination for cause of Nortel’s former CEO, CFO and Controller in April 2004; the sufficiency of Nortel’s restructuring activities, including the work plan announced on August 19, 2004 as updated on September 30, 2004 and December 14, 2004, including the potential for higher actual costs to be incurred in connection with restructuring actions compared to the estimated costs of such actions; cautious or reduced spending by Nortel’s customers; increased consolidation among Nortel’s customers and the loss of customers in certain markets; fluctuations in Nortel’s operating results and general industry, economic and market conditions and growth rates; fluctuations in Nortel’s cash flow, level of outstanding debt and current debt ratings; Nortel’s monitoring of the capital markets for opportunities to improve its capital structure and financial flexibility; Nortel’s ability to recruit and retain qualified employees; the use of cash collateral to support Nortel’s normal course business activities; the dependence on Nortel’s subsidiaries for funding; the impact of Nortel’s defined benefit plans and deferred tax assets on results of operations and Nortel’s cash flow; the adverse resolution of class actions, litigation in the ordinary course of business, intellectual property disputes and similar matters; Nortel’s dependence on new product development and its ability to predict market demand for particular products; Nortel’s ability to integrate the operations and technologies of acquired businesses in an effective manner; the impact of rapid technological and market change; the impact of price and product competition; barriers to international growth and global economic conditions, particularly in emerging markets and including interest rate and currency exchange rate fluctuations; the impact of rationalization and consolidation in the telecommunications industry; changes in regulation of the Internet; the impact of the credit risks of Nortel’s customers and the impact of customer financing and commitments; general stock market volatility; negative developments associated with Nortel’s supply contracts and contract manufacturing agreements, including as a result of using a sole supplier for a key component of certain optical networks solutions; the impact of Nortel’s supply and outsourcing contracts that contain delivery and installation provisions, which, if not met, could result in the payment of substantial penalties or liquidated damages; any undetected product defects, errors or failures; the future success of Nortel’s strategic alliances; and certain restrictions on how Nortel and its president and chief executive officer conduct business. For additional information with respect to certain of these and other factors, see the most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q filed by Nortel 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.

*Nortel, the Nortel logo and the Globemark are trademarks of Nortel Networks.

Contact Information

Pat Cooper

Nortel

Contact via E-mail