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Press Release

February 13, 2006

Garnett & Helfrich Creates New Company from Nortel Blade Server Switch Unit

Blade Network Technologies to Become Leading Provider of Network Infrastructure to the Blade Server Market

Toronto and Menlo Park, Calif.,—Nortel (NYSE/TSX: NT) and Garnett & Helfrich Capital today announced the sale of certain assets of Nortel’s Blade Server Switch Business Unit (BSSBU) to a new company named Blade Network Technologies, Inc.

Garnett & Helfrich Capital, a private equity firm focused on venture buyouts (VBOs) contributed capital to Blade Network Technologies and is the controlling shareholder. The assets contributed by Nortel include intellectual property and customer contracts. Nortel received a minority interest in Blade Network Technologies, in addition to other consideration.

David Helfrich, Managing Director of Garnett & Helfrich Capital, is the chairman of Blade Network Technologies’ Board of Directors. Eric Schoch, Vice President of Business Development, Nortel, is a board member. Vikram Mehta, a former General Manager of Nortel’s BSSBU, is President and CEO of Blade Network Technologies and a board member. Terry Garnett, Managing Director of Garnett & Helfrich Capital, is also a board member. The new company’s headquarters is located in Santa Clara, California.

“As a business in its own right, Blade Network Technologies will be well positioned to take advantage of a growing market, “ said Mike Zafirovski, President and CEO of Nortel. “In addition, this transaction is consistent with Nortel’s business transformation strategy which includes focusing only on those technologies which are strategic to our core business.”

“Garnett & Helfrich Capital and Blade Network Technologies’ management team will work to strengthen the leadership that Nortel established in the blade server market and ensure continued customer satisfaction,” said David Helfrich. “Blade Network Technologies represents everything we seek when identifying investment targets—proven technology, a solid customer base, rich talent, and compelling growth prospects. Blade Networks Technologies’ acquisition of Nortel’s BSSBU will create a well-capitalized, independent, and highly focused company, which we believe can better serve the rapidly growing needs of blade server vendors and their customers.”

According to IDC1, blade server shipments will grow at a compound annual growth rate (CAGR) of 57 percent through 2009 to reach US$10 billion, making blade servers the fastest growing segment within the server industry.

Blade Network Technologies assumes management of Nortel’s BSSBU operations, including design, manufacturing and support of existing BSSBU blade server switches. In addition, certain products supplied by Blade Network Technologies will carry the Nortel brand or the “Solutions by Nortel” brand.

“Blade server vendors and their customers have increasingly complex requirements for network blade server systems,” said Vikram Mehta. “Our singular focus on the blade market—characterized by superb execution, time-to-market velocity, and our relentless pursuit of our customers’ satisfaction—will set Blade Network Technologies apart in the marketplace. I am very excited to reunite with my BSSBU colleagues and work with the industry’s leading blade server vendors to bring innovative blade server switching solutions to the blade computing environment.”

The systems in which Nortel’s blade server switches are installed are used by Fortune 500 companies across 25 different industry segments. This transaction establishes Blade Network Technologies as one of the industry’s first vendors to focus exclusively on serving the network infrastructure needs of the rapidly growing blade server market. The new company will be one of the largest suppliers of blade server switches with an installed base of more than 52,000 switches (representing approximately 1.1 million Gigabit Ethernet ports) around the world.

1. Worldwide and U.S Blade Server 2005-2009 Forecast and 2004 Vendor Shares. IDC, July 2005.

About Nortel

Nortel is a recognized leader in delivering communications capabilities that enhance the human experience, ignite and power global commerce, and secure and protect the world’s most critical information. Our next-generation technologies, for both service providers and enterprises, span access and core networks, support multimedia and business-critical applications, and help eliminate today’s barriers to efficiency, speed and performance by simplifying networks and connecting people with information. Nortel does business in more than 150 countries. For more information, visit Nortel on the Web at www.nortel.com. For the latest Nortel news, visit www.nortel.com/news.

About Garnett & Helfrich Capital

Formed in March 2004 with $350 million in capital from leading institutional investors, Garnett & Helfrich Capital is a $350 million technology-focused private equity fund. Garnett & Helfrich is focused on spinning out businesses from large global technology companies and growing them as focused, standalone businesses. Examples include Wyse Technology (world leader in thin-client computing) and Ingres (open source enterprise database company spun out from Computer Associates). More information is available at www.garnetthelfrich.com.

Press Contacts

Kim Milosevich, OutCast Communications
(415) 345-4734 kim@outcastpr.com

Patti Vernon, Nortel
(905) 863-1035 patricve@nortel.com