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F-54
In connection with the acquisition of the 980 NPLC business from JDS, Nortel Networks Corporation issued approximately 65.7 million
common shares. The Purchase Agreement included additional consideration, not included in the purchase price, which would be payable
after December 31, 2003 in common shares of Nortel Networks Corporation. The actual number of common shares to be issued to satisfy
the additional consideration was between 10.9 million and 16.4 million common shares depending on Nortel Networks Corporation
common share price at that date. A purchase arrangement with JDS may reduce in whole or in part the number of common shares that
Nortel Networks would be required to deliver. There were no assumed options, assumed warrants or cash included as part of the
acquisition. As of December 31, 2003, the purchase arrangement was completed (see note 14).
Divestitures
Sale o
f
Arris Grou
p
,Inc.investment
On November 24, 2003, Nortel Networks sold 9 million shares of Arris Group, Inc. (“Arris Group”) for cash consideration of $49, which
resulted in a gain of $31. Following this transaction, Nortel Networks owned 5 million Arris Group common shares or 6.6 percent of
Arris Group outstanding common shares (see note 20).
H
i
g
hs
p
eed module o
p
erations
On August 10, 2003, Nortel Networks sold certain assets related to its high speed module operations to BreconRidge Manufacturing
Solutions Corporation (“BreconRidge”). Nortel Networks received proceeds of $6 in the form of cash and a note receivable. As a result
of this transaction, Nortel Networks recorded a loss of $1 during the year ended December 31, 2003. The transaction included a minimum
purchase commitment with BreconRidge requiring Nortel Networks to purchase approximately $11 and $33 of products during 2003 and
2004, respectively (see note 14).
O
p
tical com
p
onents o
p
erations
On November 8, 2002, Nortel Networks sold certain plant and equipment, inventory, patents and other intellectual property and
trademarks relating to its optical components business to Bookham. Included in the sale was the transfer of Nortel Networks transmitter
and receiver, pump laser and amplifier businesses located in Paignton, U.K., Harlow, U.K., Ottawa, Canada, Zurich, Switzerland and
Poughkeepsie, New York. Nortel Networks also transferred approximately 1,200 employees to Bookham in the transaction. Nortel
Networks received 61 million common shares of Bookham, 9 million warrants with a strike price of one-third pence Sterling, notes
receivable of $50 and cash of $10. The transaction included a minimum purchase commitment with Bookham requiring Nortel Networks
to purchase approximately $120 of product from Bookham between November 8, 2002 and March 31, 2004 (see note 14).
During the three months ended September 30, 2002, Nortel Networks classified the assets sold to Bookham as held for sale and assigned
an estimated fair value of $47 to them resulting in a charge of $123 ($89 to cost of revenues and $34 to special charges). A subsequent
increase in Bookham’s common share price prior to the November 8, 2002 close date resulted in an increase in the value assigned to the
consideration received. As a result, Nortel Networks recorded a gain on sale of businesses and assets of $29 during the year ended
December 31, 2002.
As a result of the transaction, Nortel Networks received a 29.8 percent ownership interest in Bookham. Due to restrictions on Nortel
Networks ability to vote the common shares, ability to appoint directors to the board or otherwise exercise significant influence over
Bookham, the investment has been accounted for using the cost method.
During 2003, Nortel Networks sold 30 million shares of Bookham for cash proceeds of $32 and recorded a gain of $6 which is included
in other income (expense) — net for the year ended December 31, 2003. As a result of this transaction, Nortel Networks reduced its
ownership interest in Bookham to approximately 14 percent.
Service commerce o
p
erations
On February 1, 2002, Nortel Networks sold to MetaSolv, Inc. (“MetaSolv”) certain assets of its Service Commerce operation support
system (“OSS”) business and MetaSolv assumed certain liabilities. The transaction included software assets obtained as part of the
Architel Systems Corporation (“Architel”) acquisition and certain additional assets of Nortel Networks service management and business
management OSS groups. Nortel Networks received proceeds of $35 and recorded a gain on sale of $10 related to the transaction in
2002. During the year ended December 31, 2001, Nortel Networks recorded a write down of the carrying value of the Architel assets
identified for disposition of $233 to estimated net realizable value.