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To: Mark Palmberg who wrote (4446)	10/1/1998 12:30:00 PM
From: Kenneth E. Phillipps	Respond to of 21876

Letter from Roth to all employees: Audience: All Employees (bulletin to 55686 recipients) To: All Employees From: John Roth I know you are watching with concern the decline in Nortel's stock price of yesterday and today. I want to share my personal thoughts on the situation. Yesterday, Nortel Networks held its annual financial analysts' conference in New York. We reviewed the plans of our five lines of business with the analysts as well as the status of the Bay Networks merger. The integration of Bay into Nortel continues to be a success. In the first 29 days since the merger, we have had 50 bundled bids or about two per day, of which we have won about 50% with many still to be decided. While the presentations showed good market growth in broadband - optical networks, Nortel's enterprise data and the new carrier customer segments, some of the analysts viewed several of our other market segments (wireless, central office switching, and enterprise voice) not growing with the momentum they have come to expect. At the end of the conference, we confirmed our earnings projections for the quarter and the year. We indicated that we expected revenues in the third quarter to be lower than expected with earnings for the quarter and the year to be in line with analysts' expectations. While these earnings projections are consistent with analysts' projections for Nortel Networks there appears to have been confusion in the minds of some analysts that we will not meet earnings forecasts and in others that we will not meet our quarterly revenue. A steep drop in our stock price occurred during the day and trading in our stock was halted on the New York Stock Exchange and the Toronto Stock Exchange. We issued a press release late yesterday afternoon confirming statements made at the meeting about our financial performance and trading resumed this morning. We all know that there was already nervousness in the marketplace prior to this meeting about a number of factors, which may have amplified the market reactions: Alcatel's recent announcement that their 1998 and 1999 earnings forecasts would be lower than expectations; the Asian economic crisis; the strong U.S. dollar and its impact on international companies like Nortel; and some concerns about the rationale for our recently announced restructuring and reduction of 3,500 employees. These factors have put the financial markets on edge and is impacting most major players in our industry negatively today. I know that all of you are concerned about the reaction by the financial community. We believe we are well positioned for sustained growth going forward in the new markets presented by our merger with Bay. The reaction of the analysts to the Nortel Networks new brand and how Unified Networks is differentiating our offer to customers was positive. We will continue to see our business strengthen. We also believe firmly that the Nortel-Bay merger is working and that we will continue to see positive response from customers. We need to continue to meet the financial goals we have set for the year by doing our part to make certain that we meet or better our budgets. I'm confident we can do that. John A. Roth