PARIS, February 8 /PRNewswire-FirstCall/ -- For the Fourth Quarter 2007
- Revenues of Euro 5.23 billion, up 20% sequentially and 18%
year-over-year
- Adjusted(2) operating income(1) of Euro 303 million or 5.8 % of revenues
- Adjusted net loss (group share) of Euro (48) million or Euro (0.02) per
diluted share, including an impairment charge of Euro (81) million
- Reported net loss (group share) of Euro (2.58) billion or Euro (1.14)
per diluted share, including an impairment charge of Euro (2.52) billion
For the Full Year 2007
- Revenues of Euro 17.79 billion, down 2.5% at current rate, up 2.1% at
constant rate
- Adjusted(2) operating income(1) of Euro 110 million or 0.6 % of revenues
- Adjusted(2) net loss (group share) of Euro (443) million or Euro (0.20)
per diluted share, including an impairment charge of Euro (377) million and a
restructuring charge of Euro (842) million
- Reported net loss (group share) of Euro (3.52) billion or Euro (1.56)
per diluted share, including an impairment charge of Euro (2.94) billion and
a restructuring charge of Euro (856) million
- Funded status of pensions and OPEB of Euro 2.81 billion at year-end
2007, up from Euro 2.44 billion at September 30, 2007.
Note: 2007 reported and adjusted profit and loss statement is enclosed in
Annex, click here: http://www1.alcatel-lucent.com/4q2007/pdf/annex_E.pdf
Alcatel-Lucent's Board of Directors (Euronext Paris and NYSE: ALU)
reviewed and approved reported results for the fourth quarter and the full
year 2007.
During the quarter, revenues grew 20.3 % sequentially and 18.4 %
year-over-year to Euro 5,234 billion. At constant Euro/USD exchange rate,
revenues grew 24.3 % sequentially and 25.4% year-over-year. The Carrier
business segment recorded a strong double-digit growth, up 16.2%
year-over-year at current exchange rate, driven by wireline and wireless. The
Services business segment also registered a strong 27.0% growth. Finally, the
Enterprise business segment was up 3.8%. The adjusted(2) gross margin was
32.4% of sales, impacted by a one-time charge of Euro 98 million, resulting
from a change in the cost recognition methodology for a large wireless
construction contract. Adjusted(2) operating income(1) was Euro 303 million
or 5.8% of sales. The company reduced approximately 1,600 positions in the
quarter.
For the full year 2007, Alcatel-Lucent generated revenues of Euro 17.79
billion, down 2.5% year-over-year at current exchange rate and up 2.1% at
constant Euro/USD exchange rate. The adjusted(2) operating income(1) was Euro
110 million or 0.6 % of revenues. The company reduced 6,700 positions over
the full year, before the impact of managed services and acquisitions
(approximately 1,400 people). As expected, the company did retain most of its
operating expense savings (SG&A and R&D) in 2007 (approximately Euro 280
million). Due to the continuing decrease in the market value of
Alcatel-Lucent's shares during the second half of 2007 and its revised
outlook, the company has carried out an additional impairment test of
goodwill in the fourth quarter of 2007. This test led to an impairment charge
of EUR (2.52) billion in the quarter, mainly impacting the goodwill allocated
to CDMA and IMS activities.
Executive Commentary
Patricia Russo, CEO commented:
"This quarter, we delivered solid year-over-year revenue growth of 18.4%
with the strongest performance in the carrier and services businesses. These
results reflect the strengthening of our position in IP and optics, a
recovery of our GSM business and the ramp up of WCDMA.
Our adjusted(2) gross margin - excluding the one-time impact of the
charge in the cost recognition methodology for this large wireless
construction contract - was roughly flat quarter-over-quarter, despite a
challenging pricing environment and an unfavorable shift in our geographic
and product mix. Our adjusted(2) operating margin has significantly improved
sequentially, reflecting higher volumes and, to a lesser extent, a reduction
in our operating expenses.
As we have said, 2007 was a transition year for the company as we
executed our integration plans in a difficult market environment.
Notwithstanding these challenges, the performance of our wireline, enterprise
and services business has been solid. On the other hand, the
slower-than-expected ramp up of revenues in WCDMA and NGN/IMS, two areas in
which we have been investing, has severely impacted profitability."
Outlook
While Alcatel-Lucent does not traditionally provide quarterly guidance,
it is important to be reminded of the seasonal patterns that impact the first
quarter and which historically have resulted - in the case of the former
Alcatel - in a sequential drop in revenues of 20% to 25%. The company expects
to incur a loss at the adjusted(2) operating income(1) level in the first
quarter of 2008 as a result of this seasonality.
Patricia Russo further added:
"While the long term prospects of our industry remain good, the
macroeconomic environment has created uncertainty in our markets in the last
few months. Our initial projections for 2008 indicate that the global
Telecommunications equipment and related services market should be flat to
slightly up at constant EUR/USD rate and slightly down at current rate.
With this in mind, we will continue to execute against our three-year
plan. The ongoing implementation of a more selective pricing approach as well
as product cost reduction program should enable us to improve our gross
margin. We also intend to make continued good progress in our fixed costs
reduction plan."
Given the expected improvement in the gross margin as well as a reduction
in adjusted(2) operating expenses, Alcatel-Lucent expects an adjusted(2)
operating margin in the low to mid single digit range in percentage of
revenues in full year 2008.
Reported Results
In accordance with regulatory reporting requirements, the fourth quarter
2007 and the full year 2007 reported results include the non-cash impacts
from purchase price allocation entries (PPA) following the merger with Lucent
Technologies.
For the fourth quarter 2007, Alcatel-Lucent's reported revenues amounted
to Euro 5,234 million. The reported gross profit was Euro 1,698 million,
including the impact from PPA entries of Euro 4 million. Reported operating
income(1) (loss) was Euro 155 million, including the negative impact from PPA
entries of EUR (148) million. For the quarter, reported net loss (group
share) was Euro (2,579) million or Euro (1.14) per diluted share (USD (1.67)
per ADS), including the negative impact from PPA entries of Euro (2,531)
million.
For the full year 2007, Alcatel-Lucent's reported revenues amounted to
Euro 17,792 million. The reported gross profit was Euro 5,709 million,
including the impact from PPA entries of Euro (253) million. Reported
operating income(1) (loss) was Euro (707) million, including the impact from
PPA entries of Euro (817) million. Reported net loss (group share) was Euro
(3,518) million or Euro (1.56) per diluted share (USD (2.28) per ADS),
including the impact from PPA entries of Euro (3,075) million.
Adjusted(2) Results
In addition to the reported results, Alcatel-Lucent is providing (non
audited) adjusted(2) results in order to provide meaningful comparable
information, which exclude the main non-cash impacts of the purchase price
allocation (PPA) entries in relation with Lucent business combination. These
non-cash impacts are very material and non-recurring due to the different
amortization periods depending of the nature of the adjustments, as detailed
in the annex. Reported figures are not comparable with our main competitors
and many other business players who have not undergone any similar business
combinations as the Lucent's one. Prior period results refer to adjusted(2)
pro-forma(3) combined operations for Alcatel-Lucent as of January 1, 2006.
For the fourth quarter, Alcatel-Lucent generated revenues of Euro 5,234
million, compared to a pro-forma(3) Euro 4,421 million in the year-ago
quarter, an increase of 18.4 %. The adjusted(2) gross profit was Euro 1,694
million, 32.4 % of revenues, compared to an adjusted(2) pro-forma (3) gross
profit of EUR 1,447 million in the year-ago quarter. Adjusted(2) operating
income(1) (loss) was Euro 303 million, 5.8% of revenues, compared with an
adjusted(2) pro-forma(3) operating income(1) (loss) of Euro (3) million in
the year-ago quarter. For the quarter, adjusted(2) net loss (group share) was
Euro (48) million or Euro (0.02) per diluted share (USD (0.03) per ADS). The
adjusted(2) pro-forma(3) net loss (group share) was Euro (618) million, or
Euro (0.27) per diluted share (USD (0.36) per ADS), in the fourth quarter
2006.
For the full year, Alcatel-Lucent's revenues were Euro 17,792 million,
compared to a pro-forma(3) Euro 18,254 million in 2006, a 2.5 % decrease at
current exchange rate, or a 2.1% increase at constant Euro/USD exchange rate.
The adjusted(2) gross profit was Euro 5,962 million, 33.5 % of revenues,
compared to an adjusted(2) pro-forma(3) gross profit of EUR 6,842 million in
the year-ago quarter. Adjusted(2) operating income(1) (loss) was Euro 110
million, 0.6% of sales, compared to an adjusted(2) pro-forma(3) operating
income(1) (loss) of Euro 925 million in 2006. Adjusted(2) net loss (group
share) was Euro (443) million or Euro (0.20) per diluted share (USD (0.29)
per ADS). The adjusted(2) pro-forma(3) net income (group share) was EUR 522
million, or EUR 0.23 per diluted share (USD 0.30 per ADS) in 2006.
Balance Sheet, Pension Status and Dividend Policy
The net (debt)/cash position was Euro 271 million as of December 31,
2007, compared with Euro (124) million as of September 30, 2007. The funded
status of pensions and other post retirement benefits (OPEB) amounted to Euro
2,806 million at year-end 2007, up from Euro 2,436 million as of September
30, 2007. As part of the prudent management of its funds, the group reduced
its exposure to equity markets in November 2007. As of December 31, 2007, the
global asset allocation of the group's funds was as follows: 20% in equity
securities, 60% in bonds and 20% in alternatives (i.e. real estate, private
equity and hedge funds). This compares to respectively 36%, 48% and 16% as of
December 31, 2006.
In light of these results and of a more uncertain market outlook, the
board has determined that it is prudent to suspend dividend payment for 2007.
Adjusted(2) Profit & Fourth quarter Fourth quarter Full year Full year
Loss statement 2007 2006 2007 2006
Key figures only
In Euro million
except for EPS Pro-forma(3) Pro-forma(3)
Revenues 5,234 4,421 17,792 18,254
Gross profit 1,694 1,447 5,962 6,842
In % of revenues 32.4% 32.7% 33.5% 37.5%
Operating income(1) 303 -3 110 925
In % of revenues 5.8% -0.1% 0.6% 5.1%
Net income (loss)
(Group share) -48 -618 -443 522
EPS diluted (in Euro) -0.02 -0.27 -0.20 0.23
E/ADS* diluted (in USD) -0.03 -0.36 -0.29 0.30
Number of diluted
shares (million) 2,258.7 2,250.7 2,255.9 2,266.5
* E/ADS has been calculated using the US Federal Reserve Bank of New York
noon Euro/dollar buying rate of USD 1.4603 as of December 31, 2007 and of USD
1.3197 as of December 31, 2006.
Segment breakdown Fourth quarter Fourth quarter Full year Full year
of revenues 2007 2006 2007 2006
(In Euro million) Pro-forma(3) Pro-forma(3)
Carriers 3,734 3,214 12,819 13,644
- o/w Wireline 1,691 1,470 6,003 5,735
- o/w Wireless 1,570 1,249 5,287 5,815
- o/w Convergence 473 496 1,529 2,094
Enterprise 435 419 1,562 1,491
Services 1,020 803 3,173 2,935
Other & eliminations 45 -15 238 184
Total group revenues 5,234 4,421 17,792 18,254
Segment breakdown of Fourth quarter Fourth quarter Full year Full year
adjusted(2) operating
income(1) 2007 2006 2007 2006
(In Euro million) Pro-forma(3) Pro-forma(3)
Carriers 94 -73 -151 802
In % of revenues 2.5% -2.3% -1.2% 5.9%
Enterprise 56 49 127 126
In % of revenues 12.9% 11.9% 8.1% 8.5%
Services 107 35 147 120
In % of revenues 10.5% 4.4% 4.6% 4.1%
Other & eliminations 46 -14 -13 -122
Total group adjusted
(2) op. income(1) 303 -3 110 925
Business Commentary
The following business comments are based on a year-over-year comparison
at current Euro/USD exchange rate, unless otherwise stated.
Carrier Business Segment
For the fourth quarter 2007, revenues for the carrier business segment
were Euro 3,734 million compared to a pro-forma(3) Euro 3,214 million in the
year-ago quarter, a 16.2% increase at current Euro/USD exchange rate. The
wire-line business registered a solid performance while improved performance
was seen in wireless and convergence. Adjusted(2) operating income(1) (loss)
was Euro 94 million, a 2.5% operating margin.
Since October 31, 2007 and the announcement of its reorganisation,
Alcatel-Lucent no longer manages its Carrier Business Segment according to
three business groups (Wire-line, Wireless and Convergence). The following
comments are therefore provided for the continuity of analysis for full year
2007 and may not be provided as such in future reports.
Wireline
For the fourth quarter 2007, revenue for the wireline business group were
Euro 1,691 million compared to a pro-forma(3) Euro 1,470 million a year-ago,
an increase of 15%.
Key Highlights:
- Optical networking registered very strong growth in terrestrial and in
submarine.
- Broadband access revenues were down year-over-year in the fourth
quarter, as the decline in DSL lines (-5% to 8.3 million) was not yet fully
compensated by the ramp-up in G-PON. For 2007, 33.3 million DSL lines were
delivered, up 8%.
- Data revenues enjoyed accelerated growth this quarter. This was due to
a more moderate decline in MSWAN whilst IP routing revenues were still
growing strongly.
Wireless
For the fourth quarter 2007, revenues for the wireless business segment
were Euro 1,570 million compared to a pro-forma(3) Euro 1,249 million in the
year-ago quarter, an increase of 26%, driven primarily by higher sales in GSM
and WCDMA.
Key Highlights:
- Revenue in GSM increased strongly as the new products offering (Twin
TRX and ATCA BSC) gained momentum in the market.
- WCDMA revenues more than doubled sequentially as Alcatel-Lucent started
to deploy contracts booked at the start of the year.
- CDMA revenues were up slightly year-over-year driven by the US and
India.
- Alcatel-Lucent started to book revenues in WiMax.
Convergence
For the fourth quarter 2007, revenues for the convergence business group
were Euro 473 million compared to a pro-forma(3) Euro 496 million in the
year-ago quarter, a 5% decrease.
Key Highlights:
- Classic core switching revenue continued to decline compared to the
year-ago quarter but showed a strong sequential increase due to seasonality.
- Next generation core networking also showed a strong sequential
increase driven largely by higher sales of the NGN mobile offer and increased
business in China.
- Revenues were down in the multimedia and payment businesses while IMS
revenues increased, albeit on a small base.
Enterprise Business Segment
For the fourth quarter 2007, revenues for the enterprise business segment
were Euro 435 million compared to a pro-forma(3) Euro 419 million in the
year-ago quarter, an increase of 3.8%. Adjusted(2) operating income(1) (loss)
was Euro 56 million, an operating margin of 12.9%.
Key Highlights:
- Quarterly revenues increased across all parts of the enterprise
business, with particularly strong momentum in Europe and Asia, where
Alcatel-Lucent won a number of IP transformation projects.
- Genesys, the contact centre activity, continued to grow at twice the
market rate in the fourth quarter and expanded its know-how in analytics and
performance management software through the December acquisition of Informiam.
- Over the year, Alcatel-Lucent repositioned its enterprise business in
fast growing markets, in particular security, services, verticals and
emerging markets.
Services Business Segment
For the fourth quarter 2007, revenue for the services business segment
were Euro 1,020 million compared to a pro-forma(3) Euro 803 million in the
year-ago quarter, an increase of 27.0%. Adjusted(2) operating income(1)
(loss) was Euro 107 million, a 10.5% operating margin.
Key Highlights:
- Revenues in Network operations enjoyed the strongest growth, as a
result of some of the very large contracts won this year.
- Network integration revenues were also up very strongly, driven by IPTV
and IP/network transformation projects as well as Applications integration.
- The focus on the Industry & Public sector market is starting to
pay-off, with several wins for end-to-end communications and security
solutions.
- Maintenance declined slightly due to some price pressure but
Alcatel-Lucent made significant inroads into the fast growing multi-vendor
maintenance space.
Alcatel-Lucent will host an audio webcast at 1:00 p.m. CET, which can be
accessed at http://www.alcatel-lucent.com/4q2007.
Upcoming Events/ Announcements
Complete audited consolidated financial statements will be filed in the
Document de Reference and in the Form 20F end of March 2008. In the meantime
condensed consolidated financial statements are available on our Internet
site.
February 12 Media and Investors conference at Mobile World Congress
(Barcelona)
May 30 Annual shareholders' Meeting in Paris
Notes
All adjusted figures are unaudited
(1)- Operating income (loss) is the Income (loss) from operating
activities before restructuring costs, impairment of assets, gain (loss) on
disposal of consolidated entities and post-retirement benefit plan amendment.
(2)- "Adjusted" refers to the fact that it excludes main impacts from
Lucent's purchase price allocation. (see annex for detailed information)
(3)- "Pro-forma" refers to the 2006 figures taking into account Lucent's
activity from January 1, 2006 as if Lucent was acquired at this date. In
reported figures Lucent is consolidated from December 1, 2006.
About Alcatel-Lucent
Alcatel-Lucent (Euronext Paris and NYSE: ALU) provides solutions that
enable service providers, enterprise 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 operations in more than 130 countries, Alcatel-Lucent
is a local partner wit 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 revenues of Euro 17.8 billion in 2007 and is
incorporated in France, with executive offices located in Paris. 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 such as (i) expected operating income for
the first quarter 2008, (ii) expected improvement in gross margin, and (iii)
expected improvement in operating margin in 2008. Words such as "expects,"
"anticipates," "targets," "projects," "intends," "plans," "believes,"
"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; exposure to the pricing pressures in the regions
in which we sell; 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 execute against and obtain benefits from its three-year
plan to improve gross margin and cut operating expenses, in order to achieve
an improved operating margin, and whether these efforts will achieve their
expected 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; 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, 2006, as well as other filings by Alcatel-Lucent with the
US Securities and Exchange Commission. 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 statements after the distribution of this news
release, whether as a result of new information, future events, developments,
changes in assumptions or otherwise.
Alcatel-Lucent Press Contacts
Regine Coqueran,
Tel: +33(0)1-40-76-49-24,
regine.coqueran@alcatel-lucent.com;
Stephane Lapeyrade,
Tel: +33(0)1-40-76-12-74,
stephane.lapeyrade@alcatel-lucent.com;
Alcatel-Lucent Investor Relations
Remi Thomas,
Tel: +33(0)1-40-76-50-61,
remi.thomas@alcatel-lucent.com;
Maria Alcon,
Tel: +33(0)1-40-76-15-17
maria.alcon@alcatel-lucent.com;
John DeBono,
Tel: +1-908-582-7793,
debono@alcatel-lucent.com;
Tony Lucido,
Tel: +33(0)1-40-76-49-80,
alucido@alcatel-lucent.com;
Don Sweeney,
Tel: +1-908-582-6153,
dsweeney@alcatel-lucent.com
SOURCE Alcatel-Lucent
Alcatel-Lucent Press Contacts: Regine Coqueran, Tel: +33(0)1-40-76-49-24,
regine.coqueran@alcatel-lucent.com; Stephane Lapeyrade, Tel:
+33(0)1-40-76-12-74, stephane.lapeyrade@alcatel-lucent.com; Alcatel-Lucent
Investor Relations: Remi Thomas, Tel: +33(0)1-40-76-50-61,
remi.thomas@alcatel-lucent.com; Maria Alcon, Tel: +33(0)1-40-76-15-17,
maria.alcon@alcatel-lucent.com; John DeBono, Tel: +1-908-582-7793,
debono@alcatel-lucent.com; Tony Lucido, Tel: +33(0)1-40-76-49-80,
lucido@alcatel-lucent.com; Don Sweeney, Tel: +1-908-582-6153,
dsweeney@alcatel-lucent.com
