Alcatel-Lucent delivers full-year 2011 results in line with guidance, strong Q4 2011 cash-flow generation and well positioned for a better year in 2012

Free cash-flow of € 541 million in Q4 2011 / Significant sequential improvement to cash and costs position / Higher margin and strong positive net cash position targeted for 2012 / Strategic decision to leverage the strength of Alcatel-Lucent's patent por

(PresseBox) ( Paris, )
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- Free cash-flow of € 541 million in Q4 2011
- Significant sequential improvement to cash and costs position
- Higher margin and strong positive net cash position targeted for 2012
- Strategic decision to leverage the strength of Alcatel-Lucent's patent portfolio

Key numbers for the fourth quarter 2011

- Revenues of Euro 4,256 million, up 9.5% sequentially and down 11.2% year-over-year at constant currency
- Adjusted2 gross profit of Euro 1,514 million or 35.6% of revenues
- Adjusted2 operating income1 of Euro 316 million or 7.4% of revenues
- Published net profit of Euro 868 million or Euro 0.29 per share
- Operating cash-flow3 of Euro 863 million
- Net (debt)/cash of Euro (31) million as of December 31,2011

Key numbers for the year 2011

- Revenues of Euro 15,696 million, up 1.9% year-over-year at constant currency
- Adjusted2 gross profit of Euro 5,646 million or 36.0% of revenues
- Adjusted2 operating income1 of Euro 610 million or 3.9% of revenues
- Published net profit of Euro 1,095 million or Euro 0.42 per share
- Operating cash-flow3 of Euro 979 million
- Net (debt)/cash of Euro (31) million as of December 31, 2011

All figures in this document include the Genesys business in order to provide meaningful comparable information, except the mentioned Published figures; all Published figures report Genesys in discontinued operations. In addition to the Published results and consistent with previous publications, Alcatel-Lucent is providing adjusted results which exclude the main non-cash impacts from PPA entries in relation to the Lucent business combination and report Genesys as continued operations. Operating cash-flow is defined as cash-flow after changes in working capital and before interest/tax paid, restructuring and pension & OPEB cash outlay.

Alcatel-Lucent (Euronext Paris and NYSE: ALU) announced today 2011 full year results in line with its guidance, and in the fourth quarter of 2011, a free cash-flow of €541 million and annualized fixed costs savings of €300 million.

Commenting on the results, Ben Verwaayen, CEO, Alcatel-Lucent said: "I'm very pleased by the responsiveness of our company to adapt to a changing business environment. This has resulted in a significant improvement in free-cash-flow and an acceleration of cost-reduction actions.

"Overall, this concludes a second year of strong improvement in our results, and leads to the first positive full-year net results for Alcatel-Lucent since the merger. We have strengthened our financial flexibility with the Genesys divestment, while taking the strategic decision to realize the full value of our existing and future patent portfolio."

Mr Verwaayen added: "We were operating in a challenging environment in 2011. Looking ahead, we target, in 2012, additional savings of €200m in fixed costs and €300m in variable costs. We will continue to strengthen our portfolio, drawing upon an innovation pipeline of software assets and breakthroughs in wireless and fixed-line technologies such as lightRadio, 100G coherent technology, IP and vectoring - innovations that enable operators to quickly adapt to the continuing explosion of data and content.

"Although visibility remains limited, our aim for 2012 is to achieve an adjusted operating margin higher than the level reached in 2011, and reach a strong positive net cash position at the end of 2012."

MAIN POINTS

Fourth quarter revenue decreased 12.5% year-over-year and increased 12.1% sequentially to Euro 4,256 million. At constant currency exchange rates and perimeter, revenue decreased 11.2% year-over-year and increased 9.5% sequentially. Networks saw a double digit decrease this quarter. Within that segment, the IP business while declining at a low double digit rate due to a high comparison base, recorded the second highest quarter in revenues ever. The slight growth in submarine activity was more than offset by the decline in terrestrial optics. In the wireline business, the strong sequential catch up has been driven by all the product lines. The double digit decline in Wireless activities mainly results from lower spending after several quarters of strong activity. Software, Services & Solutions decreased at a mid-single digit rate with high single digit growth in Managed Services. Finally, Enterprise segment was flat this quarter, data posting another quarter of growth. From a geographic standpoint, also adjusted for constant currency, there was a weaker fourth quarter in North America after several strong previous quarters. Central and Latin America maintained a double digit growth rate while Europe and Asia Pacific regions declined at a double digit rate.

Adjusted2 operating1 income of Euro 316 million or 7.4% of revenue. Gross margin came in at 35.6% of revenue for the quarter, compared to 36.2% in the year ago quarter and 36.3% in the third quarter 2011. The year-over-year decline in gross margin mainly results from geographical & product mix, somewhat compensated by a decrease in fixed operating costs. The sequential decline in gross margin mainly results from geographical & product mix. Operating expenses decreased 12.3% year-over-year on a reported basis and adjusted for constant currency, decreased 12.7% year-over-year. This decrease is a further result of our actions to improve operational efficiency. On a sequential basis, operating expenses decreased 0.7% as reported and decreased 3.2% at constant currency reflecting the back-end loaded nature of our 2011 costs savings program.

Published net income (group share) of Euro 868 million or Euro 0.29 per share. This includes an Euro 353 million benefit associated with the increase of the deferred tax assets in the USA and Purchase Price Adjustments to Euro (69) million pre-tax or Euro (42) million after tax.

Net (debt)/cash of Euro (31) million, versus Euro (620) million of net debt as of September 30, 2011. The sequential decrease in net debt of Euro 589 million primarily reflects the positive operating cash-flow of Euro 863 million, interest expenses of Euro (10) million, restructuring cash outlays of Euro (84) million, contribution to pensions and OPEB of Euro (45) million and capital expenditures of Euro (167) million. The positive operating cash-flow results from the level of adjusted operating income and a positive contribution from the operating working capital requirements of Euro 278 million.

Excluding Genesys business, net debt is Euro (40) million as of December 31, 2011, as presented in the reconciliation table in page 12 and following.

Funded status of Pensions and OPEB of Euro (1,830) million at end of December, compared to Euro (1,213) million as of September 30, 2011. Excluding currency impact, this deficit widening mainly results from an increase of our obligations of Euro 1,019 million, due to the decrease of around 25 bps in the discount rates used for pensions and post-retirement healthcare plans. This was partly offset by an increase of the fair value of the plan assets for Euro 716 million. The net effect of currency change was negligible on the funded status this quarter. From a regulatory perspective - which determines the funding requirements - the preliminary assessment of the company's US plans suggest that no extra funding contribution should be required through at least early 2014.

On Feb. 1, 2012, the closing of Genesys business disposal for USD 1.5 Bn has been announced.

The board has recommended not to pay a dividend for fiscal year 2011.

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

Except for historical information, all other information in this presentation 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, for example, "additional savings" and "higher margin and strong positive net cash position targeted for 2012". Words such as "expects," "looks to," "anticipates," "targets," "projects," "intends," "guidance", "maintain", "plans," "believes," "estimates," "aim," "goal," "outlook," "momentum," "continue," "reach,", "confident in," 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 factors including, among others: our ability to realize the full value of our existing and future patent portfolio in a complex technological environment, our ability to operate effectively in a highly competitive industry with many participants and to correctly identify and invest in the technologies that become commercially accepted, demand for our products, and acceptance of the technologies we seek to pioneer; difficulties and delays in our ability to execute on our strategic plan to adjust our product portfolio by boosting investment in certain segments and reducing spending in others, co-source certain business processes, focus on cash, and reduce costs; market fluctuations in the telecommunications industry; 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 suppliers for the components we need or a tight market for commodity components; the social, political and economic risks of our global operations; the costs and risks associated with pension and postretirement benefit obligations; 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; the economic situation in general (including exchange rate fluctuations) and uncertainties in Alcatel-Lucent's customers' businesses in particular; control of costs and expenses; 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 Annual Report on Form 20-F for the year ended December 31, 2010, 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 presentation, whether as a result of new information, future events, developments, changes in assumptions or otherwise.

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