The telecommunications equipment company posted a net loss of $248m (£152m) for the period ending 31 December 2002, a big improvement on its loss of $1.83bn in the same quarter a year earlier.
Revenue was down from last year to $2.52bn (£1.5bn), compared with $3.46bn in the fourth quarter of 2001.
Nortel has struggled, along with most of the telecommunications industry, with a long slump in capital investment and the company credited cost-cutting moves for the reduced loss.
Revenue rose about 7% from the previous quarter to about $2.36bn.
On a pro forma basis, Nortel posted a net loss for the fourth quarter of just $62m (£38m). Those results exclude special restructuring charges of $241m (£148m), acquisition costs of $58m, a gain of $26m (£16m) on the sale of a business and a gain on repurchase of outstanding debt securities of $60m.