Nortel Networks to Acquire CoreTek for up to US$1.43 Billion

Extends Optical Internet and Components Leadership

Next-Generation Tunable Lasers Bring New Levels Of Flexibility To Optical Internet - Increases Performance & Opportunity to Profit

Brampton, Ontario. Nortel Networks (NYSE/TSE: NT) announced today an agreement to acquire CoreTek, a pioneer in strategic optical components, for up to US$1.43 billion in Nortel Networks common shares on a fully diluted basis, a portion of which is contingent upon CoreTek achieving certain milestones. CoreTek s tunable lasers and other next-generation tunable optical components will further strengthen Nortel Networks first-mover advantage in delivering a flexible, high-performance all-optical Internet.

CoreTek is a leader and pioneer in the use of VCSEL (vertical cavity surface-emitting laser) and MEMs (micro-electromechanical systems) technology for optical networking. CoreTek s solutions use tiny, movable mirrors to alter the wavelength of light emitted by semiconductor lasers and other optical components. CoreTek s next generation devices are designed to allow networks to change the wavelength of light in real-time as it travels through a network, giving the network the flexibility to dynamically monitor and re-route traffic. This will dramatically improve the speed, performance, quality and economics of the Optical Internet.

``CoreTek s capabilities are an important building block in our vision to transform today s Internet into the all-optical Internet of tomorrow, said Clarence Chandran, president, Service Provider and Carrier Group, Nortel Networks. ``With today s announcement, we have our sights on the all-optical Internet needed to handle the explosion of demand service providers are experiencing. The all-optical Internet will deliver the power and flexibility needed to support new applications, instantly reroute traffic in response to bandwidth demand, and provision new high-speed services in a matter of minutes.

CoreTek s solutions will complement Nortel Networks industry-leading Optical Internet solutions. CoreTek s components are designed to operate in 10 Gigabits per second (Gbps) systems, the speed that Nortel Networks has made the standard for today s Optical Internet, with plans to evolve to operate in 40 Gbps and 80 Gbps systems. In addition, CoreTek s technology will complement Nortel Networks recent acquisition of Qtera and the proposed acquisition of Xros, announced last week.

``We will continue to move at Web-speed and employ a mix of alliances, acquisitions, and R&D to answer the ever-growing bandwidth demands of our customers while at the same time exponentially driving down the cost of delivering services and driving up profitability, Chandran added. CoreTek, a privately-held company with 120 employees, is based in Wilmington, Mass. It was founded in 1994. It expects to begin shipping its next-generation components in the fourth quarter of this year. CoreTek s CEO Dr. Parviz Tayebati will drive the development of CoreTek s technology within Nortel Networks. ``This was an easy decision to make, said Dr. Tayebati. ``We went with Nortel Networks because we see them as the global leader in the Optical Internet and see this combination as the ideal way to bring our pioneering technology to the global marketplace.

Nortel Networks was ranked number one globally in Optical Internet solutions for 1999, according to recent reports from the Dell Oro Group, Ryan Hankin Kent, and Warburg Dillon Read. The global Optical Internet market is expected to grow from US$19.4 billion in 1999 to US$52.3 billion in 2003, a compound annual growth rate of 28%, according to Ryan Hankin Kent.

The acquisition of CoreTek will further strengthen Nortel Networks position as a leading producer of strategic optical components, including 10 Gbps components. Nortel Networks leadership in strategic optical components is a key force behind its premier position in the Optical Internet solutions market. As previously announced, Nortel Networks is investing US$660 million to increase production capacity for its optical networking and components business, including the construction of a new laser fabrication facility in Ottawa, Canada. The transaction, which is expected to close in the second quarter of 2000, is subject to customary regulatory approvals and approval by CoreTek s shareholders. It is expected to be marginally dilutive to Nortel Networks earnings per share in calendar year 2000 and accretive in calendar year 2001 (excluding acquisition-related charges). The acquisition will not impact Nortel Networks previously-announced financial guidance. Based upon a Nortel Networks share price of US$119.75, the acquisition will result in Nortel Networks issuing approximately 8.9 million Nortel Networks common shares on a fully diluted basis at closing. Up to an additional US$361 million in common shares would be issued upon CoreTek achieving certain milestones. Nortel Networks is a world leader in the Optical Internet. More than 75 percent of North American Internet backbone traffic travels across Nortel Networks systems. In 1999, Nortel Networks set the standard for speed with its 80 Gbps line rate OPTera technology, and for bandwidth with the OPTera 1600G, which will transmit 160 colors of light across a 10 Gbps system, for total capacity of 1.6 terabits per second (Tbps). 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 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; unanticipated impact of Year 2000 issues; and the impact of consolidations in the telecommunications industry. 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.

Contact:
Business Media, Jeff Ferry, Nortel Networks, (703) 712-8339,
jferry@nortelnetworks.com;
Trade Media - Ann Fuller, Nortel Networks, (613) 299-0111,
afuller@nortelnetworks.com;
Investor Relations - Nortel Networks, (905) 863-6049, (888) 901-7286,
investor@nortelnetworks.com.