FORM 6-K
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of July, 2006
Commission File Number 1-11130
ALCATEL
(Translation of registrants name into English)
54, rue La Boétie
75008 Paris France
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form
20-F or Form 40-F.
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b) (1):
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b) (7):
Indicate by check mark whether by furnishing the information contained in this Form, the registrant
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): 82-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Alcatel
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Date: July 28, 2006 |
By: |
/S/ Jean-Pascal Beaufret
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Jean-Pascal Beaufret |
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Chief Financial Officer |
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Press release
Alcatel reports second quarter 2006: revenues up 8%
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Second quarter financial highlights: |
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Revenues up 7.6% yoy at Euro 3,384 million |
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Operating profit at Euro 263 million, a 7.8% operating margin |
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Net income (group share) at Euro 180 million, EPS at Euro 0.13 |
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Net cash position at Euro 980 million |
Paris, July 27, 2006 Alcatels (Paris: CGEP.PA and NYSE: ALA) Board of Directors reviewed and
approved second quarter 2006 results. Revenues were up by 7.6% at Euro 3,384 million compared with
Euro 3,145 million (up 7.3% at constant Euro/USD exchange rate) in the same period last year. The
gross margin was 33.6%. Operating profit amounted to Euro 263 million, a 7.8% operating margin,
and included a Euro 12 million impact from a capital gain resulting from disposal of fixed assets.
Net income (group share) for the quarter was registered at Euro 180 million or a diluted EPS of
Euro 0.13 per share (USD 0.17 per ADS), (Euro 0.12 per share, excluding capital gains) which
compared with a diluted EPS in second quarter 2005 of Euro 0.14 (Euro 0.09 per share, excluding
capital gains).
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Key Figures |
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Second Qtr |
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Second Qtr |
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First Qtr |
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2006 |
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2005 |
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2006 |
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In Euro million except for EPS |
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Profit & Loss |
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Revenues |
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3,384 |
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3,145 |
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3,067 |
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Operating Profit |
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263 |
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263 |
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198 |
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Income from operating activities |
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243 |
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209 |
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157 |
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Net income (group share ) |
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180 |
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196 |
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104 |
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EPS Diluted (in Euro) |
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0.13 |
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0.14 |
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0.08 |
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EPS Diluted (in Euro) excluding capital gains |
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0.12 |
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0.09 |
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0.06 |
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E/ADS (in USD)* |
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0.17 |
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0.18 |
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0.10 |
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Number of shares (billion) |
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1.38 |
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1.37 |
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1.38 |
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*E/ADS has been calculated using the US Federal Reserve Bank of New York noon euro/dollar
buying rate of USD1.28 as of June 30, 2006.
Serge Tchuruk, Chairman and CEO, summarized the Boards observations:
While preparing for the merger with Lucent Technologies and the Thales transaction, Alcatel
achieved good revenue growth in the second quarter, above market rate. Our strong performance in
the wireline segment confirmed Alcatels leading position in the network transformation to an
all-IP infrastructure to support triple play services. We are particularly pleased with the
resulting 4-fold year over year revenue increase in IP routing and aggregation as well as our
strong position in the DSL and fiber access markets. With the industry consolidation gaining
momentum, the wireless market environment becomes
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even more competitive as some players are aggressively trying to reposition themselves. In this
context, we remained deliberately selective in addressing contract opportunities involving mature
technologies. At the same time we continued to invest in key future wireless technologies and
applications to develop a leading position in next generation networks. The forthcoming Lucent
merger will bring added scale into related R&D programs.
We were particularly satisfied with the strong quarter in North America where we registered a 40%
growth (USD), driven by a strong demand for triple play services, and with our activity in China,
which saw more than a 20% increase (USD), with significant strength in wireless.
Going into the second half of the year we expect to see the carrier market growing in the mid
single digit range for full year 2006. As we expect the pending merger with Lucent Technologies to
close during the fourth quarter, we are not providing specific annual guidance. We are also
working on the Thales transaction which is targeted to close before year-end.
Our third quarter will be a transition quarter where we expect revenues to grow year over year in
the mid single digit range (at the current structure). The operating profit should be close to the
same amount as in the second quarter of 2006, taking into account increased investments in R&D and
additional costs associated with the strategic moves underway.
Together with Lucent Technologies as a combined company, we are comfortable in our ability to
achieve the targeted Euro 1.4 billion in cost synergies, which should translate into significantly
improved profitability for the future. Furthermore, this transaction will give us the economies of
scale needed in all R&D areas and will position the company to capitalize on the trend towards
converged networks, which we believe will drive the carrier market.
MERGER UPDATE
On July 24, 2006, the European Commission informed Alcatel and Lucent Technologies that their
proposed merger complies with the European Unions competition rules and that the two companies
have its approval to merge. As announced on July 10, 2006, the companies believe they
are currently on track to complete their merger transaction by the end of calendar year 2006.
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Segment Breakdown |
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Second Qtr |
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Second Qtr |
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First Qtr |
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In Euro million |
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2006 |
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2005 |
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2006 |
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Revenues |
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Fixed Communications |
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1,363 |
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1,224 |
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1,273 |
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Mobile Communications |
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1,007 |
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958 |
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908 |
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Private Communications |
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1,034 |
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981 |
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905 |
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Other & Eliminations |
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(20 |
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(18 |
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(19 |
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Total |
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3,384 |
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3,145 |
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3,067 |
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Income from Operations |
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Fixed Communications |
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133 |
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120 |
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110 |
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Mobile Communications |
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80 |
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115 |
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57 |
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Private Communications |
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51 |
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59 |
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48 |
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Other & Eliminations |
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(1 |
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(31 |
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(17 |
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Total |
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263 |
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263 |
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198 |
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Second Quarter Business Update
Note: The following comments are based on year on year comparisons.
Fixed communications
Second quarter revenue increased by 11.4% to Euro 1,363 million compared with Euro 1,224 million in
the same period last year. Strength continued in the IP network transformation and revenues were
driven by the access and IP carrier data activities for triple play and enterprise applications.
The IP data business once again recorded significant growth, with new contract wins in the U.S.,
Denmark, Spain, Venezuela, Malaysia and Thailand. In addition to the strong momentum in IP service
routing, the MSWAN activity continued to reflect sustained demand for ATM-based DSL aggregation and
for 3G RAN (Radio Access Network) aggregation . The access business also performed well
during the quarter, registering a record 6.7 million DSL line shipments which outperformed market
growth, with a good performance across the regions, compared with the same period last year.
Alcatels IP access platform product revenues also continued to grow significantly during the
quarter. The optical business slowed slightly on year over year comparisons, however, a leading
position was maintained and a promising pick up was registered in the DWDM business driven by
bandwidth expansion to support video services. Revenues grew significantly in the NGN/IMS
activity, more than doubling in the first half of the year compared to 2005, with good traction at
incumbent operators in Europe and Asia. The business now has more than 90 customers. A major win
in the Enterprise fixed mobile convergence was awarded this quarter with a tier-1 operator in the
UK. The traditional TDM voice activity continued to decline as expected during the quarter,
however, some of this decrease was offset by maintenance/services revenue, which now accounts for a
significant portion of the business.
Operating profit amounted to Euro 133 million, representing a 9.8% operating margin with
significant contributions coming from the IP data and access businesses, offset in part by impact
from labor strike in optics.
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Mobile communications
Second quarter revenue increased by 5.1% to Euro 1,007 million compared with Euro 958 million in
the same period last year. Revenues were strong in the 2G mobile radio business with solid growth
in the emerging markets, especially China, while the 3G product family is generating a growing
revenue stream, where a new win in Malaysia was registered during the quarter. The core switching
business continues its significant shift from traditional TDM to NGN/IMS solutions, leading to a
substantial decrease in the TDM activity. Alcatel has now installed NGN subscriber capacity of 50+
million to date with over 60 live sites, and has now passed more than 17 billion calls on its next
generation call server technology. Video and payment applications once again registered a
significant revenue increase. Mobile operators confirmed their interest to implement Mobile TV
services, where Alcatel recorded several wins in the quarter with its leading technology. Although
revenues are still marginal in the WiMAX activity, recent trends confirmed the growing acceptance
of the Alcatel solution, as demonstrated by an important win with one of the major operators in
North America.
Operating profit amounted to Euro 80 million, representing a 7.9% operating margin, with
investments in the NGN/IMS core, 3G and WiMAX product offering continuing to impact margins, in a
competitive pricing environment.
Private communications
Second quarter revenue increased by 5.4% to Euro 1,034 million compared with Euro 981 million in
the same period last year. Revenues were strong in the enterprise and rail communication
activities. The enterprise business turned in a good performance across all product lines, with
particular strength in Asia Pacific and Latin America, although the growth was somewhat tempered by
the reorganization of one of the primary distribution channels in Europe. New markets are steadily
growing as a percentage of revenues for this division. The contact center activity, Genesys,
continued to be a strong driver for revenue progression. The rail communications grew its revenue
as a result of good execution of all our programs, especially in the U.S. and the UK for the subway
segment. New contracts were signed during the quarter, in particular a combined signaling and
communications project for a new high speed line in Spain. The integration and services business
saw a good quarter and was positively impacted by carrier customers moving into an all IP
infrastructure and the needs for an associated OSS system and partner to handle their integration
needs. The space activity registered a soft quarter due to a delay in order intake for an
institutional program, however two new commercial wins were recorded in the U.S. and in the Middle
East.
Operating profit amounted to Euro 51 million, representing a 4.9% operating margin, with a
satisfactory performance coming from all businesses.
Alcatel will host an audio web cast at 1:00 p.m. Paris time (12:00 p.m. London and 7:00 a.m. New
York), which can be accessed at http://www.alcatel.com/2q2006/ or
http://www.alcatel.fr/2q2006.
Second quarter 2006 results
Consolidated Income Statement:
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Revenues: Euro 3,384 million vs. Euro 3,145 million Q2 05 (up 7.6%) and vs. Euro
3,067 million sequentially |
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Geographical distribution of revenues: |
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W. Europe: |
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39% |
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North America: |
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18% |
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Asia: |
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16% |
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RoW: |
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27% |
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Gross margin: 33.6% (35.6% for Q2 05) |
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Selling, general and administration (SG&A) costs: Euro (512) million (15.1% of sales) |
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Research and development (R&D) expenses: Euro (362) million (10.7% of sales) |
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Operating profit: Euro 263 million, an 7.8% operating margin |
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Income from operating activities: Euro 243 million and included |
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Share-based payment at Euro (14) million |
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Restructuring at Euro (2) million |
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Goodwill Impairment Euro (4) million |
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Income (loss) before tax and discontinued operations: Euro 238 million and included: |
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Net financial costs of Euro (21) million |
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Share of equity affiliates at Euro 16 million |
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Income (loss) from continuing operations: Euro 196 million and included: |
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Income tax expense of Euro 42 million |
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Net Income (Group share): Euro 180 million |
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Diluted EPS : Euro 0.13 (USD 0.17 per ADS) based on an average of 1.38 billion shares |
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BALANCE SHEET ITEMS: |
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Operating working capital: Euro 1,076 million, 7.8% of last 12 months revenues |
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Cash and equivalents and marketable securities: Euro 4,500 million |
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Net Cash: Euro 980 million |
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Upcoming Events/Announcements |
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September 7, 2006
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Annual Shareholders Meeting |
October 25, 2006
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Third quarter earnings announcement |
About Alcatel
Alcatel provides communications solutions to telecommunication carriers, Internet service providers
and enterprises for delivery of voice, data and video applications to their customers or employees.
Alcatel brings its leading position in fixed and mobile broadband networks, applications and
services, to help its partners and customers build a user-centric broadband world. With sales of
EURO 13.1 billion and 58,000 employees in 2005, Alcatel operates in more than 130 countries. For
more information, visit Alcatel on the Internet: http://www.alcatel.com
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Alcatel Press Contacts |
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Régine Coqueran
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Tel :+ 33 (0)1 40 76 49 24
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regine.coqueran@alcatel.com |
Stéphane Lapeyrade
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Tel.: +33 (0)1 40 76 12 74
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stephane.lapeyrade@alcatel.com |
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Alcatel Investor Relations |
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Pascal Bantegnie
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Tel: +33 (0)1 40 76 52 20
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pascal.bantegnie@alcatel.com |
Nicolas Leyssieux
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Tel: +33 (0)1 40 76 37 32
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nicolas.leyssieux@alcatel.com |
Maria Alcon
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Tel: +33 (0)1 40 76 15 17
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maria.alcon@alcatel.com |
Charlotte Laurent-Ottomane
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Tel: +1 703 668 7016
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charlotte.laurent-ottomane@alcatel.com |
Safe Harbor statement under the Private Securities Litigation Reform Act of 1995: This press
release contains forward-looking statements relating to (i) Alcatels performance in future
periods, including without limitation, with respect to third quarter 2006 revenue, gross margin,
operating profit and earnings per share (EPS) (ii) the benefits to Alcatel in 2006 from its
improvements in product costs and restructuring efforts, (iii) improvements in margins from new
technologies, and (iv) benefits that will result from strategic partnerships, acquisitions and
divestitures, and in particular the operations contemplated with Lucent and Thales. These forward
looking statements are based on current expectations, forecasts and assumptions that involve risks
and uncertainties that could cause actual outcomes and results to differ materially from those
projected. These risks and uncertainties include: whether Alcatel 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 Alcatels customers businesses in particular; customer demand for Alcatels
products and services; control of costs and expenses; international growth; conditions and growth
rates in the telecommunications industry and general domestic and international economic
conditions; the timing of closing and expected benefits from the operations contemplated with
Lucent and Thales; and the impact of each of these factors on sales and income. For a further list
and description of such risks and uncertainties, see the reports filed by Alcatel with the
Securities and Exchange Commission. Alcatel disclaims any intention or obligation to update or
revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
In connection with the proposed transaction between Lucent and Alcatel, Alcatel has filed a
registration statement on Form F-4 (File no. 33-133919) (the Form F-4) to register the Alcatel
ordinary shares underlying the Alcatel American Depositary Shares (ADS) to be issued in the
proposed transaction. Alcatel and Lucent have also filed, and intend to continue to file,
additional relevant materials with the SEC, including a registration statement on Form F-6 (the
Form F-6 and together with the Form F-4, the Registration Statements) to register the Alcatel
ADSs to be issued in the proposed transaction. The Registration Statements and the related proxy
statement/prospectus contain and will contain important information about Lucent, Alcatel, the
proposed transaction and related matters. Investors and security holders are urged to read the
Registration Statements and the related proxy statement/prospectus carefully, and any other
relevant documents filed with the SEC, including all amendments, because they contain important
information. Investors and security holders may obtain free copies of the documents filed with the
SEC by Lucent and Alcatel (including the Form F-4 and, when filed, the Form F-6) through the web
site maintained by the SEC at www.sec.gov. In addition, investors and security holders may obtain
free copies of materials filed with the SEC by Lucent and Alcatel (including the Form F-4 and, when
filed, the Form F-6) by contacting Investor Relations at www.lucent.com, by mail to 600 Mountain
Avenue, Murray Hill, New Jersey 07974 or by telephone at 908-582-8500 and from Alcatel by
contacting Investor Relations at
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www.alcatel.com, by mail to 54, rue La Boétie, 75008 Paris, France or by telephone at
33-1-40-76-10-10. Lucent and its directors and executive officers also may be deemed to be
participants in the solicitation of proxies from the stockholders of Lucent in connection with the
transaction described herein. Information regarding the special interests of these directors and
executive officers in the transaction described herein is included in the Form F-4 (and will be
included in the definitive proxy statement/prospectus for the proposed transaction). Additional
information regarding these directors and executive officers is also included in Lucents proxy
statement for its 2006 annual meeting of stockholders, which was filed with the SEC on or about
January 3, 2006. This document is available free of charge at the SECs web site at www.sec.gov
and from Lucent by contacting Investor Relations at www.lucent.com, by mail to 600 Mountain Avenue,
Murray Hill, New Jersey 07974 or by telephone at 908-582-8500. Alcatel and its directors and
executive officers may be deemed to be participants in the solicitation of proxies from the
stockholders of Lucent in connection with the transaction described herein. Information regarding
the special interests of these directors and executive officers in the transaction described herein
is included in the Form F-4 (and will be included in the definitive proxy statement/prospectus for
the proposed transaction). Additional information regarding these directors and executive officers
is also included in Alcatels annual report on Form 20-F filed with the SEC on March 31, 2006. This
document is available free of charge at the SECs web site at www.sec.gov and from Alcatel by
contacting Investor Relations at www.alcatel.com, by mail to 54, rue La Boétie, 75008 Paris, France
or by telephone at 33-1-40-76-10-10.
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