35
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of
O
erations — Table of Contents
Business overview
37
Our business
37
Our segments
37
Our business environmen
38
How we measure
er
ormance
39
Our strate
ic
lan and outlook
40
Develo
ments in 2003 and 2004
41
2003 consolidated results summar
41
Nortel Networks Audit Committee Inde
endent Review; restatements; related matters
41
Comprehensive Review and First Restatement 41
Independent Review 42
Second Restatement 42
Material weaknesses in internal control over financial reporting identified in Second Restatement 48
Revenue Independent Review 49
Personnel actions 49
EDC Support Facility 49
Credit facilities and security agreements 50
Debt securities 50
Shelf registration statement 51
Credit ratings 51
Regulatory actions and pending litigation 51
Stoc
-based compensation plans 51
Evolution o
our su
l
chain strate
52
Other business developments
52
Shareholder rights plan 52
Ownership adjustment in our French and German operations 53
Customer financing commitments 53
Sale of Entrust shares 53
Real estate 53
Customer contract settlement 53
Directory and operator services business 53
Bharat Sanchar Nigram Limited contract 53
Patent infringement settlement 53
Customer financing arrangements 54
Results of o
erations — continuin
o
erations
54
Se
ment revenues
54
Geo
ra
hic revenues
54
Consolidated revenues
54
Wireless Networks revenues 56
Enterprise Networks revenues 58
Wireline Networks revenues 60
Optical Networks revenues 61
Gross
ro
it and
ross mar
in
63
Segment gross profit and gross margin 63
Operating expenses
65
Selling, general and administrative expense 65
Segment selling, general and administrative expense 65
Research and development expense 66
Segment research and development expense 67
Segment contribution margin 68
Segment Management EBT 68
