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F-74
During the year ended December 31, 2002, Nortel Networks reassessed its remaining provisions for discontinued operations and recorded
a net additional loss of $97. The loss consisted of additional provisions for both short-term and long-term receivables of $157, offset by
gains of $60 due to other changes in estimates.
On June 25, 2002, Arris Group completed a secondary public offering of 15 million common shares held by Nortel Networks. Following
the closing of the offering, Nortel Networks owned 22 million shares, or approximately 27 percent of Arris Group’s common shares. The
cash proceeds received were $67 and a gain of approximately $17 was recorded as a result of this transaction. During the three months
ended March 31, 2002, Nortel Networks recorded a gain of approximately $13 due to the reduction of Nortel Networks ownership interest
in Arris Group, received for Nortel Networks original interest in Arris Group, from approximately 49 percent to approximately 46 percent
as a result of Arris Group’s issuance of common shares in connection with its acquisition of another company.
In addition, during the year, as a result of negotiation with Arris Group, Nortel Networks reduced the carrying value of its membership
interest in Arris Interactive and recorded a loss of $14.
On April 21, 2002, Nortel Networks entered into an agreement with Aastra Technologies Limited to sell certain assets, which were
included in discontinued operations, associated with Nortel Networks prior acquisition of Aptis Communications, Inc. (“Aptis”). The
transaction was completed during the three months ended June 30, 2002. The consideration primarily consisted of approximately $16 in
cash, as well as contingent cash consideration of up to $60 over four years based on the achievement of certain revenue targets by the
business. Nortel Networks recorded a loss of approximately $44 on the transaction.
On March 5, 2002, Nortel Networks divested its approximately 46 percent ownership interest in Elastic Networks Inc. (“Elastic
Networks”) to Paradyne Networks, Inc. (“Paradyne”) in exchange for an approximately 8 percent ownership interest in Paradyne. Nortel
Networks recorded a gain of approximately $7 on the transaction. The investment in Paradyne has been classified within continuing
operations.
On February 6, 2002, Nortel Networks divested its 68.5 percent interest in Netgear, Inc. in exchange for cash proceeds of $5, a
subordinated, unsecured, convertible, promissory note receivable of $20, and the assumption of certain liabilities. Nortel Networks
recorded a gain of approximately $7 on this transaction. Subsequent to 2002, Nortel Networks received cash of $20 relating to the
repayment of the subordinated, unsecured, convertible, promissory note receivable.
2001 Activity
On June 14, 2001, Nortel Networks Board of Directors approved a plan to discontinue Nortel Networks access solutions operations
consisting of all of Nortel Networks narrowband and broadband access solutions, including copper, cable and fixed wireless solutions, as
well as Nortel Networks then consolidated membership interest in Arris Group and equity investment in Elastic Networks. Also affected
by the decision were Nortel Networks prior acquisitions of Sonoma Systems (“Sonoma”), Promatory Communications, Inc.
(“Promatory”), Aptis and Broadband Networks Inc.
In connection with the decision to discontinue the access solutions operations on June 14, 2001, Nortel Networks recorded a pre-tax loss
on disposal of the access solutions operations of $2,173 in the three months ended June 30, 2001, which reflected the estimated costs
directly associated with Nortel Networks plan of disposition. The loss reflected: goodwill write-off of $755 associated with the acquisition
of Sonoma and Promatory; provisions for both short-term and long-term receivables of $423; a provision for inventories of $621; other
asset write-offs totaling $102; future contractual obligations and estimated liabilities of $123; estimated operating losses during the
planned period of disposition of $127; and estimated workforce reduction costs of $22.
In the three months ended June 30, 2001, Nortel Networks also reassessed the carrying value of certain investments totaling $41. Based on
this assessment, the fair value of these assets was nil, and the write-off of $41 was included in net earnings (loss) from discontinued
operations, net of tax of nil.
During the six months ended December 31, 2001, Nortel Networks reassessed its remaining provisions for discontinued operations and
recorded an additional pre-tax loss of $261. The loss consisted mainly of additional provisions for customer financing receivables and
equity losses on investments.
On August 24, 2001, Nortel Networks completed a transaction with Zhone Technologies, Inc. to sell the AccessNode ABM and CDS shelf
products and the Universal Edge 9000 digital loop carrier shelf and remote access shelf products for cash proceeds of $8, which resulted in
alossof$9.