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Paris, January 23, 2007 - Alcatel-Lucent (Euronext Paris and NYSE:
ALU) today announced that it expects reported revenues for the fourth quarter
of 2006 to be approximately Euro 3.87 billion and reported operating
income(1) to be approximately Euro 0.12 billion, including the
impact from purchase accounting entries of approximately Euro (0.23) billion.
Restructuring charges (which consist primarily of non cash write-offs of
intangibles associated with product rationalization and of a limited impact
from headcount reduction at this point) and asset impairment charges of
capitalized development costs are expected to be approximately Euro (0.80)
billion for the fourth quarter 2006.
Alcatel-Lucent expects on a preliminary basis its full year 2006 reported
revenue to be approximately Euro 12.3 billion and reported operating
income(1) to be approximately Euro 0.71 billion, including the
impact from purchase accounting entries of approximately Euro (0.23)
billion.
The reported results for the fourth quarter 2006 will include Alcatel
stand-alone operations for October and November 2006, and the combined
operations of Alcatel-Lucent for December 2006. Businesses to be contributed to
Thales will be presented as discontinued activities.
The reported results for the full year 2006 will include Alcatel stand-alone
operations from January to November 2006, and combined operations of
Alcatel-Lucent for December 2006. Businesses to be contributed to Thales will
be presented as discontinued activities.
These preliminary results are based on unaudited financial information and
on preliminary information reviewed by the management to date. These results
remain subject to the completion of the Alcatel-Lucent accounting closing
process, and approval by the Board of Directors. The company will provide its
fourth quarter and full year 2006 results on Friday, February 9, 2007.
Fourth Quarter and Full Year 2006 adjusted pro-forma Results
In order to provide meaningful comparable information, Alcatel-Lucent
intends to provide adjusted pro-forma financial results, in addition to
reported results for the fourth quarter and full year 2006, in its February 9,
2007 announcement. These results will include combined operations for
Alcatel-Lucent as of January 1, 2006. Businesses to be contributed to Thales
will be presented as discontinued activities. These results will exclude any
impact from purchase accounting entries.
On an adjusted pro-forma basis, Alcatel-Lucent expects fourth quarter 2006
revenue to be approximately Euro 4.42 billion, compared with revenue of Euro
5.25 billion in the 2005 fourth quarter. Fourth quarter 2006 operating
profit(2) is expected to be approximately at breakeven, compared
with Euro 0.57 billion profit for the 2005 fourth quarter.
On an adjusted pro-forma basis, Alcatel-Lucent expects full year 2006
revenue to be approximately Euro 18.3 billion, compared with Euro
18.6(3) billion revenue for full year 2005. Full year 2006 operating
profit(2) is expected to be approximately Euro 1.04 billion,
compared with Euro 1.41(3) billion in full year 2005.
Executive Commentary
“2006 was an extraordinary year in many ways for our company,” said Patricia
Russo, Chief Executive Officer of Alcatel-Lucent. “We completed the first
and largest merger to date in our industry, we enhanced our wireless portfolio
through the acquisition of Nortel’s UMTS radio business and we completed a
substantial part of the transfer of some of our operations to Thales.
In the past few months, these moves created short-term uncertainty for our
customers and for our people as we worked to develop the combined company’s
product portfolio and new organization structure. This uncertainty
together with the work required to close the merger significantly impacted the
business. In addition, the last quarter of the year proved to be
challenging from a market perspective, driven by a shift in spending from some
of our large North American customers and heightened competition in the global
wireless market. Overall, the 2006 adjusted pro-forma financial results
of the combined company were impacted by the weak performance in the fourth
quarter resulting in cumulative revenues for full year 2006 at a similar level
to full year 2005 revenues.
Despite the challenges we faced during the quarter, considerable progress
was made in planning the convergence of product lines, the optimization of
synergies and the preparation of cost cutting programs. As we begin our
first year as a combined Alcatel-Lucent we can now more fully benefit from the
impact of these major strategic moves as well as begin to achieve our future
potential. Based on our outstanding combined portfolio of technology and
global footprint, we feel confident that Alcatel-Lucent can resume growth in
full year 2007, with growth gaining momentum throughout the year, and with a
growth rate at least at the carrier market growth rate which today we see in
the mid single digits. In a market that continues to be highly
competitive, Alcatel-Lucent has decided to take additional actions to further
reduce its cost structure. Together with the initial cost synergies plan, we
expect to achieve combined cost savings of at least Euro 600 million in full
year 2007, which is Euro 200 million higher than our initial synergy target for
2007.
With the merger closed and with 2006 behind us, we now look forward to
beginning a new era as a diversified player, well-positioned with the scale and
scope needed to address ongoing market changes and opportunities.”
The quarterly earnings press and analyst conference call will take place on
February 9 at 1:00 p.m. CET (7:00 a.m. EST).
(1) Operating Income is herein referred to as the income (loss)
from operating activities before restructuring, impairment of capitalized
development costs, and gain (loss) on disposal of consolidated
entities.
(2) Operating Profit is herein referred to as the income (loss)
from operating activities before restructuring, impairment of capitalized
development costs, share-based payment, and gain (loss) on disposal of
consolidated entities.
(3)To be compared with our last set of 2005 pro forma figures
published on November 14, 2006 in the F-3 Form, i.e. pro forma revenues of Euro
18,569 million and pro forma operating profit of Euro 564 million. The
published operating profit in F-3 Form of Euro 564 million includes charges of
Euro (799) million for purchase accounting.
The remaining difference Euro (48) million being explained by adjustments
resulting from the ex Lucent’s data conversion from U.S. GAAP to IFRS.
About Alcatel-Lucent
Alcatel-Lucent (Euronext Paris and NYSE: ALU) provides solutions that enable
service providers, enterprises and governments worldwide, to deliver voice,
data and video communication services to end-users. As a leader in fixed,
mobile and converged broadband networking, IP technologies, applications, and
services, Alcatel-Lucent offers the end-to-end solutions that enable compelling
communications services for people at home, at work and on the move. With
79,000 employees and operations in more than 130 countries, Alcatel-Lucent is a
local partner with global reach. The company has the most experienced global
services team in the industry, and one of the largest research, technology and
innovation organizations in the telecommunications industry. Alcatel-Lucent
achieved proforma combined revenues of Euro 18.6 billion in 2005, and is
incorporated in France, with executive offices located in Paris. [All figures
exclude impact of activities to be transferred to Thales]. For more
information, visit Alcatel-Lucent on the Internet:
http://www.alcatel-lucent.com
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS
Except for historical information, all other information in this press
release consists of forward-looking statements within the meaning of the US
Private Securities Litigation Reform Act of 1995, as amended. These forward
looking statements include statements regarding the future financial and
operating results of Alcatel-Lucent as well as the benefits and synergies of
the completed merger transaction, benefits to Alcatel-Lucent from its
improvements in product costs and restructuring efforts,improvements in new
technologies, benefits that will result from strategic partnerships,
acquisitions and divestitures and other statements about Alcatel-Lucent
managements' future expectations, beliefs, goals, plans or prospects that are
based on current expectations, estimates, forecasts and projections about
Alcatel-Lucent, as well as Alcatel-Lucent's future performance and the
industries in which Alcatel-Lucent operates, in addition to managements'
assumptions. Words such as "expects," "anticipates,"
"targets," "goals," "projects," "intends,"
"plans," "believes," "seeks," "estimates,"
variations of such words and similar expressions are intended to identify such
forward-looking statements which are not statements of historical facts. These
forward-looking statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to assess.
Therefore, actual outcomes and results may differ materially from what is
expressed or forecasted in such forward-looking statements. These risks and
uncertainties are based upon a number of important factors including, among
others: our ability to operate effectively in a highly competitive industry
with many participants; our ability to keep pace with technological advances
and correctly identify and invest in the technologies that become commercially
accepted; difficulties and delays in achieving synergies and cost savings;
fluctuations in the telecommunications market; the pricing, cost and other
risks inherent in long-term sales agreements; exposure to the credit risk of
customers; reliance on a limited number of contract manufacturers to supply
products we sell; the social, political and economic risks of our global
operations; the costs and risks associated with pension and postretirement
benefit obligations; the complexity of products sold; changes to existing
regulations or technical standards; existing and future litigation;
difficulties and costs in protecting intellectual property rights and exposure
to infringement claims by others; compliance with environmental, health and
safety laws; whether Alcatel-Lucent can continue to obtain product cost
improvements and to implement cost cutting and restructuring programs and
whether these efforts will achieve their expected benefits, including
improvements in net income, among other benefits; the economic situation in
general (including exchange rate fluctuations) and uncertainties in
Alcatel-Lucent’s customers’ businesses in particular; customer demand for
Alcatel-Lucent’s products and services; control of costs and expenses;
international growth; conditions and growth rates in the telecommunications
industry; the timing of closing and expected benefits from the operations
transferred or to be transferred to Thales and the benefits arising from the
increase in the Company's interest in Thales; and the impact of each of these
factors on sales and income. For a more complete list and description of such
risks and uncertainties, refer to Alcatel-Lucent's Form 20-F for the year ended
December 31, 2005, as amended, as well as other filings by Alcatel-Lucent and
Lucent Technologies Inc. with the US Securities and Exchange Commission
including Lucent's Proxy Statement dated August 7, 2006. Except as required
under the US federal securities laws and the rules and regulations of the US
Securities and Exchange Commission, Alcatel-Lucent disclaims any intention or
obligation to update any forward-looking statementsafter the distribution of
this news release, whether as a result of new information, future events,
developments, changes in assumptions or otherwise.
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