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Strategic plan
On August 19, 2004, we first announced a new strategic plan, which contains the following principal components:
Our strategic plan also includes a work plan involving focused workforce reductions of approximately 3,250 employees, a voluntary retirement
program, real estate optimization and other cost containment actions such as reductions in information services costs, outsourced services and
other discretionary spending. Approximately 64% of employee actions related to the focused workforce reduction were completed by the end
of 2004, including approximately 55% that were notified of termination or acceptance of voluntary retirement, with the remainder comprising
voluntary attrition of employees that were not replaced. The remainder of employee actions are expected to be completed by June 30, 2005. In
addition, however, the Company continues to hire in certain strategic areas such as investments in the finance organization. Our intention is
that our strategic plan will enable us to build on our market leadership in developing the converged networks of the future and improve
business efficiency and operating cost performance in an increasingly competitive market. It is our intention to be optimally positioned to
maximize strategic opportunities as they arise and leverage our acknowledged strengths in high reliability networks and strong customer
loyalty. We continue to drive the business forward with a focus on costs, cash and revenues as strategic goals. We remain committed to our
business strategy of technology and solutions evolution in helping our customers transform their networks and implement new applications and
services to drive improved productivity.
Other business developments
We engaged in a number of activities in 2003 and 2004, in part to respond to the industry environment and in part to address various business
matters that arose during those periods. Some of our activities and other business developments included:
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Corporation common shares; the exercise of outstanding options granted under Nortel Networks Corporation 2000 Stock Option Plan, or
the 2000 Plan, and the Nortel Networks Corporation 1986 Stock Option Plan as amended and restated, or the 1986 Plan, or the grant of
any additional options under those plans, or the exercise of outstanding options granted under employee stock option plans previously
assumed by us in connection with mergers and acquisitions; and the purchase of units in a Nortel Networks stock fund or purchase of
Nortel Networks Corporation common shares under our defined contribution and investment plans, until such time as, at the earliest, we
are in compliance with U.S. and Canadian regulatory securities filing requirements.
• On April 28, 2004, Standard and Poor’s, or S&P, downgraded its ratings on NNL, including its long-term corporate credit ratings from
“B” to “B-” and its preferred shares ratings from “CCC” to “CCC-”. At the same time, it revised its outlook to developing from negative.
On April 28, 2004, Moody’s Investor’s Service, Inc. changed its outlook to potential downgrade from uncertain. See “Liquidity and
capital resources — Credit ratings” in the MD&A section of this report.
• a renewed commitment to best corporate practices and ethical conduct, including the establishment of the office of a chief ethics
and compliance officer which has been filled on an interim basis pending the permanent appointment of Susan E. Shepard, as now
announced;
• a streamlined organizational structure to reflect alignment with carrier converged networks;
• an increased focus on the enterprise market and customers;
• optimized research and development programs for highly secure, available and reliable converged networks;
• the establishment of a chief strategy officer to drive partnerships, new markets and acquisitions;
• the establishment of a chief marketing officer to drive overall marketing strategy;
• the strategic review of embedded services to assess opportunities in the professional services business; an
d
• a distinct focus on government and defense customers.
2003
• realigning our business activities in France and Germany;
• reducing undrawn customer financing commitments;
• entering into an agreement with EDC regarding arrangements to provide support for certain of our performance-related obligations;
and
• substantially completing the wind-down of our discontinued access solutions operations.