UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
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|_| Preliminary Proxy Statement
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|_| Definitive Proxy Statement
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|X| Soliciting Material Pursuant to ss.240.14a-12
LUCENT TECHNOLOGIES INC.
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transaction applies:
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The following material was used by company employees and other advisors
following the public announcement of the entry into a merger agreement by Lucent
Technologies Inc. and Alcatel:
EARNINGS Q&A
REVENUES:
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Q: ARE EV-DO SALES CONSIDERED APPLICATIONS SALES?
A: EV-DO sales are considered mobility product sales, not application revenues.
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Q: CAN YOU COMMENT ON THE EXPECTED TIMING OF REVA AVAILABILITY?
A: EV-DO RevA will enable VoIP and Push-To-Talk, multimedia applications,
blending of VoIP with other applications and services, and increase network
capacity. We expect RevA to be available late in '06.
Q: HAVE YOU NOW BEGUN RECOGNIZING REVENUE FROM THE CINGULAR?
A: We do not call out revenues by individual customer, contract or product.
However, I can tell you we did book revenues for the Cingular contract in Q106.
Q: WHEN YOU MENTION WEAKNESS IN CHINA, CAN YOU PROVIDE SOME SENSE OF WHETHER YOU
ARE PUSHING OUT YOUR ASSUMPTIONS ON THE TIMING OF CHINESE 3G LICENSE AWARDS?
A: I would not speculate on the timing of the 3G license awards in China.
IMS:
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Q: AS IMS AND APPLICATIONS REVENUES GROW BEYOND FY06, WHAT IS THE EXPECTED
IMPACT ON GROSS MARGIN AND OPERATING EXPENSES?
A: We believe we will start to see a ramp of revenues associated with the IMS
contracts in FY07. While I would not comment on the gross margins associated
with our IMS portfolio of products, nor the associated operating expenses, I
will tell you that we are very comfortable with the aggregate margin of the IMS
portfolio when you look at the entire mix (hardware, software etc...) and we
believe that we will be able to maintain the overall margin guidance we've
provided as IMS revenues start to ramp.
Q: HOW MANY IMS CONTRACTS AND TRIALS HAVE YOU ANNOUNCED TO DATE?
A: To date, we have announced 8 customers for our IMS portfolio. As a result of
our success in converting IMS trials to deployments, in addition to these
publicly announced wins, we now have 77 trials ongoing for our IMS-based network
elements with 16 fixed, mobile and converged customers, including six new trials
for session managers.
Q: HAS VERIZON ALREADY SIGNED UP FOR IMS WITH LUCENT OR ARE YOU SOLELY IN
TRIALS?
A: Verizon is currently conducting an extensive trial of a wide range of
elements from our IMS solution, including our Session Manager, Active PhoneBook,
MiLife SurePay Solutions Suite, Feature
Server, Network Gateway and VitalSuite Network Performance Management Software.
We consider this to be a very important opportunity.
Q: CAN YOU GIVE US AN IDEA OF THE SIZE OF ONE OF THESE IMS CONTRACTS?
A: We would characterize today's IMS contracts as smaller opportunities. They
are tens of millions; they're not big, multi-hundred million dollar contracts.
We do, however, feel that the big contracts are to come. The evolution of IMS is
very consistent with what we've seen in new introductions of this magnitude in
the past, where the contracts initially are smaller, and then get bigger as the
technology evolves.
When you think about IMS contracts, there are of course the hardware and
software elements as well as the whole integration services opportunity set.
This latter aspect of IMS is much larger than our traditional service
opportunity associated with any hardware sales. So, it's a very different
construct of opportunity for us - you can't just look at the hardware and
software components of an IMS build. As IMS networks evolve and as the services
get proved in, we will see not only the hardware and software opportunity, but
also a large services opportunity with it.
"BUDGET FLUSH":
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Q: CAN YOU PROVIDE SOME COLOR BEHIND YOUR COMMENTS REGARDING THE LACK OF BUDGET
FLUSH DURING THE DECEMBER QUARTER?
A: Unfortunately, there isn't a simple answer - you'd have to almost go
customer-by-customer. In the past, we have seen some capital flush roll through
at the end of the calendar year. In this particular quarter we didn't see that
and in fact, in a number of cases, we actually saw a pullback very late in the
quarter.
Q: WAS THE Q106 REVENUE DECLINE A RESULT OF A REVENUE RECOGNITION ISSUES WITH
PERCENT OF COMPLETION CONTRACTS? DID IT HAVE TO DO WITH LOST SHARE OR LOST
OPPORTUNITY THAT YOU EXPECT TO MAKE UP GOING FORWARD IN NEW OPPORTUNITIES?
A: As recently as December 14th when we filed our 10K, we clearly were
anticipating a higher Q106 revenue number. However, please recall that most of
our revenue is recorded in the last month of a quarter and then most of that
revenue is recorded in the last two weeks of that month. So clearly, the revenue
we recorded in the last month and the last two weeks was lower than we expected.
The drop in revenue was driven by the fact that we didn't see some of the
calendar year-end spend from our customers that we've seen in the past. In fact,
in certain instances, we actually saw a pullback. From our perspective, once you
don't see that end-of-calendar year spend, those CapEx dollars are gone. We're
now focusing on the new calendar year's CapEx budgets.
Q: WERE YOUR "LACK OF BUDGET FLUSH" COMMENTS U.S.-SPECIFIC OR MORE GLOBAL IN
NATURE?
A: We really didn't see any budget flush anywhere. While we have greater
visibility in the US, we didn't see anything dramatically different in non-US
markets than we saw in the U.S.
Q: DO YOU THINK THE LACK OF A BUDGET FLUSH THIS QUARTER IMPLIES ANYTHING FOR '06
SERVICE PROVIDER CAPEX TARGETS?
A: I wouldn't take our experience last quarter with regards to the lack of
budget flush as an indicator of what service provider capital plans will look
like in '06.
OTHER:
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Q: CAN YOU DISCUSS PRICING IN INDIA AND WHETHER OR NOT WE WILL SEE ANY BETTER
PRICING OR MARGIN PERFORMANCE IN THAT MARKET?
A: We continue to see the pricing environment in India as extremely challenging.
We're clearly competing in that market and trying to win business; but we're
trying to win it "the right way". We're not going to sign business with big
contract losses. We have not, and will not, engage those kinds of contracts
because, while it can have a positive impact on revenue, it would have an
adverse impact on profitability and cash flow and our bias is toward
profitability and cash flow. So where there's really difficult pricing that
would negatively impact our financial performance from a profitability and cash
perspective, we are walking away from business.
Q: IS YOUR NEW MULTIMEDIA ACCESS PLATFORM COMMERCIALLY AVAILABLE TODAY? IF SO,
HOW MANY IPTV TRIALS ARE YOU IN?
A: We expect to do some trialing and controlled introduction of MMAP in the
second half of fiscal year 2006 with general availability early in fiscal year
'07.
We are also participating in some areas, especially in Latin America, as the
network integrator for IPTV rollouts, so we continue to see good opportunities
there. We have some unannounced trials underway for our IPTV solution in North
America and in the Caribbean/Latin American region.
Q: CAN YOU TALK ABOUT THE NUMBER OF UMTS TRIALS THAT YOU HAVE ONGOING OR HOW
MANY UMTS OPPORTUNITIES YOU SEE THIS YEAR?
A: Right now, we are working opportunities in several places. In addition to
China Netcom and eAccess in Japan, we are also conducting trials in other places
in Asia as well as Western and Eastern Europe.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS AND OTHER IMPORTANT INFORMATION
This document contains statements regarding the proposed transaction between
Lucent and Alcatel, the expected timetable for completing the transaction,
future financial and operating results, benefits and synergies of the proposed
transaction and other statements about Lucent and Alcatel's managements' future
expectations, beliefs, goals, plans or prospects that are based on current
expectations, estimates, forecasts and projections about Lucent and Alcatel and
the combined company, as well as Lucent's and Alcatel's and the combined
company's future performance and the industries in which Lucent and Alcatel
operate and the combined company will operate, in addition to managements'
assumptions. These statements constitute forward-looking statements within the
meaning of the U.S. Private Securities Litigation Reform Act of 1995. 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: the ability to consummate
the proposed transaction; difficulties and delays in obtaining regulatory
approvals for the proposed transaction; difficulties and delays in achieving
synergies and cost savings; potential difficulties in meeting conditions set
forth in the definitive merger agreement entered into by Lucent and Alcatel;
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 respective
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; and compliance with environmental, health and
safety laws. For a more complete list and description of such risks and
uncertainties, refer to Lucent's Form 10-K for the year ended September 30, 2005
and Alcatel's Form 20-F for the year ended December 31, 2005 as well as other
filings by Lucent and Alcatel 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, Lucent and Alcatel
disclaim any intention or obligation to update any forward-looking statements
after the distribution of this document, whether as a result of new information,
future events, developments, changes in assumptions or otherwise.
IMPORTANT ADDITIONAL INFORMATION WILL BE FILED WITH THE SEC
In connection with the proposed transaction, Alcatel and Lucent intend to file
relevant materials with the Securities and Exchange Commission (the "SEC"),
including the filing by Alcatel with the SEC of a Registration Statement on Form
F-6 and a Registration Statement on Form F-4 (collectively, the "Registration
Statements"), which will include a preliminary prospectus and related materials
to register the Alcatel American Depositary Shares ("ADS"), as well as the
Alcatel ordinary shares underlying such Alcatel ADSs, to be issued in exchange
for Lucent common shares, and Lucent and Alcatel plan to file with the SEC and
mail to their respective stockholders a Proxy Statement/Prospectus relating to
the proposed transaction. The Registration Statements and the Proxy
Statement/Prospectus will contain important information about Lucent, Alcatel,
the transaction and related matters. Investors and security holders are urged to
read the Registration Statements and the Proxy Statement/Prospectus carefully
when they are available. Investors and security holders will be able to obtain
free copies of the Registration Statements and the Proxy Statement/Prospectus
and other documents filed with the SEC by Lucent and Alcatel through the web
site maintained by the SEC at www.sec.gov. In addition, investors and security
holders will be able to obtain free copies of the Registration Statements and
the Proxy Statement/Prospectus when they become available 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 and from Alcatel
by contacting Investor Relations at www.alcatel.com, by mail to 54, rue La
Boetie, 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 will be included in the Proxy Statement/Prospectus described
above. Additional information regarding these directors and executive officers
is also included in Lucent's 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 SEC's 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 will be included in the Proxy Statement/Prospectus described
above. Additional information regarding these directors and executive officers
is also included in Alcatel's Form 20-F filed with the SEC on March 31, 2006.
This document is available free of charge at the SEC's web site at www.sec.gov
and from Alcatel by contacting Investor Relations at www.alcatel.com, by mail to
54, rue La Boetie, 75008 Paris, France or by telephone at 33-1-40-76-10-10.