Nortel Networks Annual Report 1998

Corporate Profile Who we are Nortel Networks is a global supplier of communications networks and services for data and telephony, bringing together a broad range of complementary networking technologies, skills, distributor channels, and integrated networking capabilities. Nortel Networks works with carrier and enterprise customers worldwide to design, build, and deliver Unified Network solutions. Unified Networks create greater value for customers worldwide through integrated network solutions spanning data and telephony. Unified Networks blend routing, optical, wireline, wireless, switching, and Internet Protocol technologies in a seamless manner to deliver service predictability and security. Customers include public and private A New Era of Networking enterprises and institutions; Internet service providers; local and long-distance, cellular, and PCS communications companies; cable www.nortelnetworks.com television carriers; and public utilities. annual.report.98 Nortel Networks’ common shares are listed on the New York, Toronto, Montréal, Vancouver, and London stock exchanges. Nortel Networks had 1998 revenues of $17.6 billion and has approximately 75,000 employees in over 150 countries and territories. 65097.11/03-99 www.nortelnetworks.com Annual.report.98 The Web is changing everything The Web is changing everything, including our annual report. Last year, we defined our webtone vision of making the World Wide Web the foundation for a dramatically different kind of service to society. We set out to use our experience and networking expertise to build the Web into a reliable, secure, commercial-grade system that could support a wide array of business transactions. We’re leading the way by using the Web to maintain closer relationships with customers, employees, suppliers, analysts, and – starting with this year’s annual report – our investors. In the new era of Web-based communications, the traditional annual report is a relic from the past. Therefore, as part of evolving into a more Web-centric company, we are providing a less elaborate report in printed form and a Web-based interactive version in the Investor Relations section of our website. The benefits include shareholder-ready access to information about the company, as well as savings in design, paper, production, and distribution costs. The document in hand provides you with detailed information about the company’s financial performance in 1998, in line with meeting our requirements to deliver an annual report to shareholders. For comprehensive information about our business and integrated network solutions, visit www.nortelnetworks.com. 1 Letter to Shareholders 5 Year in Review 9 Financial Section 10 Financial Review 30 Consolidated Financial Statements 36 Notes to Consolidated Financial Statements 68 Directors and Officers Corporate Information All dollar amounts in this annual report are in U.S. dollars unless otherwise stated. Annual.report.98 Letter to Shareholders Annual.report.98 Letter to Shareholders A New Era of Networking The global communications industry has technology is powering the Internet revolu- will be with us for many years to come. experienced more than two decades of rev- tion that’s changing the way the world com- Customers today require networks capa- olutionary ferment. As we approach the end municates. Seventy-five percent of Internet ble of handling both voice and data traffic, of the twentieth century, the pace of change traffic in North America is carried on Nortel unifying circuit and packet systems. has never been more rapid nor the changes Networks high-performance optical networks. Leading-edge networks blend switching, more profound. After just a few short years, the Internet routing, IP networking, fiber optics, wireless, The marketplace is being dramatically is becoming part of everyday life. It elimi- and other technologies. These are the funda- reshaped by deregulation, technology, and nates the constraints of time and distance mental building blocks for networks capable mobility, compounded by the explosive and gives us global access to information, of carrying huge volumes of Internet traffic growth of the Internet, as both a communi- not only in online libraries, but in businesses efficiently, quickly, and most important as cations medium and a business phenomenon. and in people’s minds. commerce moves onto the Web reliably. Powerful drivers of change are transforming Together, the Internet and the World Nortel Networks brings to the market network economics, creating new customer Wide Web are having a major impact on the a unique ability to integrate and combine relationships, and generating massive invest- volume and kinds of traffic carried on the disparate technologies in reliable, secure ment in network infrastructure, services, world’s networks. They’re helping to change Unified Networks that span data and telephony. With our competence and strength in Nortel Networks is at the heart of the Internet all major networking technologies, we can reach into our portfolio of technologies and revolution and the opportunities it offers for creating a services and put together solutions that meet new era of networking. diverse needs. We are one of the few companies capable of guiding customers to the future, no matter how their networks evolve. and applications. These are the characteris- the way we think about networks and the Our mission is to deliver greater value to tics of a new era of networking that will very nature of what networks do. customers worldwide through integrated define the global economy and society of Until recently, “the network” referred to network solutions. We’re bringing together the next century. the worldwide telecommunications infra- and unifying many diverse networks and The new era of networking excites the structure of local and long-distance networks building a more reliable Internet to enable imagination in many ways. Sometimes it’s whose primary service was voice telephony. new ways for people to share ideas, do the little things that capture our attention, Not any more. Today, “the network” is an business, and improve the quality of life for such as getting a better deal on a new car expanding web of interconnected voice and themselves and their communities. after comparison shopping on the Web, or data networks, private and public networks, effortlessly reaching the office through a and wireline and wireless networks. Our Financial Performance wireless laptop connection. The traditional telecom and data net- Our strong position was gained during a But the new era of networking is about working industries have changed fundamen- year of dramatic change in the industry and big things, too. It offers a panoramic vision tally. The market is volatile and customers the global economy, as well as in Nortel of a networked society that allows our ideas are uncertain about the demands end- Networks, which experienced more funda- and aspirations to soar around the globe and users will put on their networks and how mental change in 1998 than at any other into cyberspace. those networks will evolve. The boundaries time in its history. But your company between enterprise and carrier networks and entered 1999 in better shape than ever, lay- At the Heart of the Revolution between wireless and wireline are blurring. ing new foundations for growth by working Telecommunications is the “killer app” driv- New and traditional customers are moving with customers and partners to create a new ing the Internet revolution. This is good into a world of networks designed for data. era of networking. news for a company like Nortel Networks Increasingly, these data networks use the By any measure, 1998 was a year of ac- that understands both telecommunications Internet Protocol (IP), the language of the complishment for your company. Thanks to and the Internet. It puts your company at Internet and the standard for the networks the support of our customers and investors, the heart of the revolution the coming of the future. But the thousands of circuit- and the commitment of 75,000 employees together of public and private networks with switched networks built for voice commu- around the world, Nortel Networks set new the Internet. High-performance optical nication worldwide during the past century records for financial performance: 2 NORTEL NETWORKS 1998 ANNUAL REPORT • Revenues rose 14 percent to an all-time faction and loyalty of our customers. brought us expertise in next-generation high of $17.6 billion. Customer satisfaction and loyalty ratings remote-access data networking and virtual • Net earnings applicable to common both increased two percentage points over private networks. With Cambrian Systems shares of $1.07 billion (before acquisition- 1997. With our solid fourth quarter and Corporation, we added metropolitan areas related costs, one-time gains, and charges), record order input for the year, we began to our world-leading position in optical or $1.86 per share, were up 32 percent and 1999 with strong momentum and confi- networking. 21 percent, respectively, over 1997. dence in the future. The acquisition of Bay Networks, com- • Record order input of $18.5 billion from pleted smoothly and in record time, ongoing operations represented an increase A More Powerful Company brought us leading-edge customers and of 16 percent over 1997. Our customers are seeing a more powerful enterprise sales channel partners, a strong Nortel Networks is a well-balanced com- company building even greater strength by portfolio,

Load more