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TBR 4Q10 Alcatel-Lucent Initial Response Report

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Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company …

Technology Business Research is a different kind of research company. Our bottoms-up approach provides a look at the technology industry unlike anything you’ve seen before. We analyze company performance in professional services, networking and mobility, computing and hardware, and software on a quarterly basis, leveraging our data to create industry benchmarks and landscapes that provide a business perspective on leaders and laggards and their business plans. We are experts in the business of technology.

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  • 1. NETWORK BUSINESS QUARTERLYSM4Q10 INITIAL RESPONSEAlcatel-LucentFourth Calendar Quarter 2010Fourth Fiscal Quarter 2010 Ended Dec. 31, 2010Publish Date: Feb. 11, 2011Author: Chris Antlitz (chris.antlitz@tbri.com), NBQ AnalystContent Editor: John Byrne, NBQ Director TBR T E C H N O L O G Y B U S I N E S S R ES E AR C H , I N C .
  • 2. Executive Summary TBRAlcatel-Lucent is in growth mode and plans to keep that momentumgoing by investing in HLN, copper “life extension” solutions, and apps TBRTBR Position: TBR ALCATEL-LUCENT REVENUE BY SEGMENT AND GROWTH € 5,000 25.0%Strong growth prospects across nearly all operating € 4,500 20.0%segments, mixed with reduction in fixed costs, will € 4,000 15.0% € 948 € 1,140help make 2011 a strong year for Alcatel-Lucent. € 3,500 € 1,030 € 883 10.0% In € Millions € 3,000 € 575 • All segments and regions grew in 4Q10, with € 2,500 € 535 € 772 € 489 € 499 5.0% particular strength in equipment sales in the U.S. € 2,000 € 2,242 € 416 0.0% -5.0% and China. € 1,500 € 2,459 € 2,952 -10.0% € 1,000 € 2,304 • Sales of High Leverage Network (HLN) solutions € 500 € 1,928 -15.0% surged 72% year-to-year, exceeding €1.3 billion (or €- -20.0% $1.8 billion) on strong data equipment sales. HLN 4Q09 Services 1Q10 2Q10 3Q10 Applications Software 4Q10 sales comprised 46% of total equipment sales, up Carrier Year-to-year Revenue Growth from 35% in 4Q09. SOURCE: TBR AND ALCATEL-LUCENT • Component shortages are easing, but lead times remain longer than usual, which will prolong Alcatel-Lucent Corporate Strategies revenue recognition of outstanding projects. • Reduce fixed-cost structure by trimming legacy costs • Though 2011 is poised to be a good year for Alcatel- and consolidating operations Lucent, management maintained previous • Drive sales of High Leverage Network solutions by guidance, which targets an operating margin of 5% helping operators realize the benefits of network of higher. transformation and modernization • IP transformation and network convergence • Focus R&D on promising technologies, such as projects are in the early stages. With strong multiscreen delivery and femtocells offerings in equipment, apps and services, Alcatel- • Leverage assets from ProgrammableWeb and Lucent continues to position itself as a one-stop OpenPlug to gain traction in Applications Enablement shop for all of an operator’s needs.2 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 3. Executive Summary TBRGrowth in India largely hinges on services, as Alcatel-Lucent failed toland any 3G contracts Key Developments • LTE, CDMA, optical and IP revenue flooded in from Verizon, while Sprint began its ambitious Network Tier 1 Vision project, which will require high volumes of multimode base stations and IP equipment. From just operators in these two operators, Alcatel-Lucent will reap over $5 billion over the next four years. the U.S. and • China was the other big consumer of network equipment in 4Q10, as telcos in the country continued to China fueled aggressively bulk up their 2G and 3G capacity to handle an influx of voice and data traffic. Chinese sales equipment grew over 50% year-to-year in 4Q10. Major frame agreements with China Mobile, China Unicom and growth China Telecom, which are worth a combined €1.2 billion ($1.6 billion), will drive equipment sales in APAC. • Though management views India as a key growth market for Alcatel-Lucent, the vendor was absent from the flurry of 3G infrastructure deals struck in the last five months. Unable to win 3G • As the last major market for greenfield network rollout, NEPs have been vigilant in locking up market contracts in share and strengthening customer relationships with Indian operators. The result is a cut-throat price war that will surely pressure gross margin for Ericsson, Nokia Siemens, Huawei and ZTE through 2011. India, Alcatel- • TBR believes Alcatel-Lucent will look to services and applications to grow in India, as it appears Lucent will look to unwilling to reduce prices to secure market share. Alcatel-Lucent has beefed up its services presence in India, establishing a network operations and support center in Bangalore to handle outsourced services networks and planning to move its global services HQ to India over the next three years to better position itself for TIS contracts. • Alcatel-Lucent’s Strategic Industries segment, which includes transportation, energy and public sector The Strategic verticals, posted double-digit growth in 4Q10, aided by a contract with Stratos Global to supply IP/MPLS Industries equipment and professional services to oil and gas platforms in the Gulf of Mexico. Though Alcatel- unit has Lucent has historically been involved in the Enterprise segment, its telco expertise in networks and promising services is trickling into deals with non-telco customers. future • Leveraging TIS and equipment resources beyond traditional telcos greatly increases the addressable market for network vendors, opening up new opportunities for long-term growth.3 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 4. Executive Summary TBRThe exponential rise in global data traffic levels is fueling growthin applications and services, as well as in equipmentQuarterly Segment Performance 4Q10 Growth Segment Key Changes & Drivers Trends to Monitor Revenue Y/Y • Operators around the globe will push • IP and wireless registered the strongest into rural areas to acquire new growth, as uptake of HLN solutions €3 customers as urban and suburban gained momentum. areas reach saturation. • LTE comprised 3.4% of Networks billion Networks 31.7% • This trend will fuel mobile broadband revenue and 2.1% of total revenue. LTE (or $4 equipment sales, because it is less is expected to comprise a larger share billion) expensive to deploy wireless to the of revenue through 2011 as Verizon and last mile than to roll out fixed service AT&T ramp up rollout. to each end-user. • Enterprise investment in data The telecommunications market is networking solutions grew revenue for €575 clearly moving toward network Genesys and offset declines in million convergence, which requiresApplications traditional voice. 7.5% investment in application enablement Software (or $781 and multiscreen software to give • Digital media and remote customer management are driving Network million) consumers access to content anywhere applications sales. on any screen. • Strategic Industries unit is running at a €1 billion+ annual run-rate. • Multivendor maintenance revenue is €1.1 Alcatel-Lucent will leverage its TIS weak, as operators increasingly prefer billion expertise to sell telecom services to Services 10.7% non-telecom customers, greatly to keep that function internalized. (or $1.5 Maintenance is a high-margin business, billion) expanding the addressable market. and the fall-off in revenue in 4Q10 hampered overall services margin.4 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 5. Financial Model Strategy TBRThe reduction of fixed costs over the past two years has positionedAlcatel-Lucent for margin growth in 2011 Revenues TBR ALCATEL-LUCENT PROFITABILITY AND GROWTH • Total revenue grew €895 million, or 22.6% year-to- € 5,000 30% year to €4.9 billion (or $6.6 billion), fueled by strong € 4,000 20% In € Millions global demand for IP and wireless equipment. € 3,000 10% Expenses € 2,000 0% • SG&A comprised 15.3% of total revenue, down 180 € 1,000 -10% basis points year-to-year on cost savings from €0 -20% restructuring. (€ 1,000) -30% 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. • R&D spend grew €127 million (or 22.3%) year-to- Total Revenue Gross Profit year as Alcatel-Lucent invests in promising areas Operating Profit Year-to-Year Revenue Growth SOURCE: TBR AND ALCATEL-LUCENT within copper, IP and multimedia. Margins • Reported gross margin narrowed 40 basis points TBR ALCATEL-LUCENT ADJUSTED OPERATING MARGIN year-to-year to 36.2% on price competition in EMEA BY SEGMENT and APAC. 20% • All operating segments were profitable in 4Q10 on 15% an adjusted basis, indicating that Alcatel-Lucent’s 10% transformation strategy is working. 5% 0% • Networks adjusted operating margin surged to 7.8% -5% from 0.8% in 4Q09, as HLN products, which carry -10% higher margins, comprised a growing proportion of 4Q09 1Q10 2Q10 3Q10 4Q10 total equipment sales. Networks Applications Software Services • Applications and services adjusted operating margins SOURCE: TBR AND ALCATEL-LUCENT declined from 4Q09 levels on unfavorable mix.5 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 6. Financial Model Strategy TBROperator efforts to bulk up data capacity is fueling demand forproducts across Alcatel-Lucent’s portfolio, particularly IP and wireless Networks Revenue Performance Networks Segment Revenue Drivers Wireless: • LTE revenue exceeded €100 million ($136 ALCATEL-LUCENT NETWORKS REVENUE BY SUBSEGMENT million), with nearly all of it from Verizon.TBR €1.2 billion • GSM, CDMA and WCDMA all grew at a double- € 3,000 ($1.6 billion), digit rate year-to-year as operators bulked up € 488 € 2,500 € 396 Wireline 44.5% Y/Y capacity on 2G and 3G networks.In € Millions € 2,000 € 398 € 366 € 1,156 € 298 Wireless € 1,500 € 800 € 1,021 € 1,068 Wireline: • All segments except TDM switching grew, with € 819 € 1,000 € 815 Optics €488 million fixed broadband access technologies driving € 763 € 622 € 651 IP Routing growth. € 500 € 567 € 320 € 272 € 318 € 366 € 508 ($663 • PON grew 55% year-to-year, offsetting €0 4Q09 1Q10 2Q10 3Q10 4Q10 million), significant contraction in legacy fixedSOURCE: TBR AND ALCATEL-LUCENT 22.6% Y/Y technologies. • The component shortages experienced in 2010 Optics: primarily affected optics, stifling sales growth;TBR ALCATEL-LUCENT NETWORKS REVENUE COMPOSITION however, terrestrial sales remained strong, led €815 million30% by WDM, which grew 50% from 4Q09.25% ($1.1 billion), • Submarine sales fell 30% year-to-year but20% 6.8% Y/Y should rebound strongly in 1Q11 as deals15% signed in 4Q10 start to ramp up.10% IP Routing: Strong demand for backhaul pushed the IP5% €508 million division into record sales territory. IP0% 4Q09 1Q10 2Q10 3Q10 4Q10 ($690 transformation projects are sprouting up in all IP Routing Optics Wireless Wireline million), regions, indicating that operators are feelingSOURCE: TBR AND ALCATEL-LUCENT 58.8% Y/Y pressured to modernize their networks to better handle data traffic. 6 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 7. Go-to-Market & Product Strategies TBRSprint’s Network Vision and Verizon and AT&T’s LTE builds will stimulatesales across Alcatel-Lucent’s product and service portfolios through 2011 Wireline Wireless Extending the life of copper is a promising niche market Sprint’s Network Vision and AT&T’s LTE build will ramp for Alcatel-Lucent to exploit. Though new fixed-access up during 2011, supporting wireless sales. In Network deployments are fiber-based, legacy copper Vision, Alcatel-Lucent joins Ericsson and Samsung in infrastructure is still widely used and maintained by phasing out Sprint’s iDEN network and refarming the legacy operators. Vectoring, bonding and phantom spectrum for CDMA. Alcatel-Lucent will provide a range mode technologies all allow incumbent operators to of services, as well as multimode RAN, IP/MPLS and leverage their copper infrastructure, saving opex and microwave backhaul, to consolidate Sprint’s four capex and increasing the utility of those assets. Trials network technologies onto one platform. TBR believes and close collaboration with A1 Telekom in Austria and Alcatel-Lucent will reap 15& to 20% of the $4 billion to Turk Telekom in Turkey aim to prepare these $5 billion contract, with 75% going to Ericsson and 5& technologies for commercial deployments. to 10% going to Samsung. Optics IP • Submarine sales fell at a double-digit rate in 2010, but • Exponential growth in video is already straining global recent signings with GlobeNet, Bezeq International, data networks, pushing operators to migrate toward Seychelles Cable System and UNIFI place the unit on all-IP. This trend augurs well for sales of Alcatel- solid footing in 2011. Lucent’s High Leverage Network solutions. • Alcatel-Lucent’s Converged Backbone Transformation • Alcatel-Lucent won a major three-year IP solution was selected by 360networks in the U.S., and transformation contract from America Móvil to its 100G coherent optical transport solution was deploy an IP/MPLS mobile backhaul solution. Alcatel- selected by Orion in Canada. Lucent will supply its 7750 Service Router, 7705 Service Aggregation Router, and 5620 Service Aware Manager to create a scalable, packet-based network across the operator’s entire Latin America footprint, which spans 11 countries.7 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 8. Go-to-Market & Product Strategies TBRAlcatel-Lucent hopes to mine opportunities in network automationfollowing its inclusion in the UniverSelf consortium Services • Alcatel-Lucent joined 16 European operators, IT firms, infrastructure vendors and academic institutions to launch “UniverSelf.” The consortium will focus on employing automation in networks to lower opex. Automation is a growing area of interest for operators and vendors alike. Automation reduces the human element in the process of rolling out and maintaining networks, saving money on truck rolls and installation. • Operators committing to converge their networks provide Alcatel-Lucent with a prime opportunity to sell an array of services. Recent converged network projects awarded from Vodafone Qatar and China Unicom included an equipment, applications and services component. In both instances, Alcatel-Lucent was selected to not only converge the network but also provide managed services. Applications Software • Digital Media & Advertising and Motive solutions are the primary growth drivers within the Network applications unit. Applications maintenance and software customization are also growing strong, helping to offset contraction in legacy payment and messaging solutions. • In Applications Enablement, Alcatel-Lucent partnered with Mobinil of Egypt to trial its Optism mobile advertising solution. Mobile advertising is a promising area with the potential for scalable growth. With smartphone penetration expected to exceed 500 million units by the end of 2012 and new categories such as tablets and eReaders gaining momentum, marketers have a huge opportunity to sell advertisements through these mobile devices. • The data networking business of Genesys is growing rapidly as enterprises struggle to cope, maintain and generate useful information from its data. Notable wins include selling MTS the Genesys Contact Center solution and an intelligent workload distribution solution (iWD) to an operator in Eastern Europe. Going forward, Genesys hopes to spur revenue from the SMB segment by pushing its new Omni eXchange Office platform, which boasts modern multimedia and collaboration functionality.8 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 9. Resource Management Strategy TBRBell Labs is focused on network efficiency, automation, small cellsand extending the life of legacy technologies, such as copper Investments/R&D Focus • Alcatel-Lucent is aiming to expand its enterprise Alcatel-Lucent’s business in the coming quarters, specifically in Worldwide Operations Middle Eastern markets. It hopes to achieve an “above market” growth of 10% in the segment, Alcatel-Lucent is investing $500 million over the focusing primarily on penetrating the healthcare, next three years to move its services HQ to India education and transportation industries. and build out more support facilities in the • In January, Bell Labs stepped up its involvement with country. Alcatel-Lucent will leverage India’s low- Green Touch, a global consortium tasked with making cost, highly skilled labor pool to compete more networks more energy-efficient. The initiative brings to light the issue of balancing network capacity with effectively in the increasingly crowded remote efficiency. network services segment. Personnel Changes • In February, Alcatel-Lucent appointed Lucy Dimes as CEO of U.K. and Ireland operations, replacing Restructuring Initiatives former CEO Lakh Jemmett. 2011 marks the third and final year of Alcatel- • In January, Gianluca Baini was appointed as Lucent’s transformation initiative. The company chairman and CEO of Alcatel-Lucent Italia, lowered its fixed costs and breakeven point by €300 replacing former CEO Stefano Lorenzi. million and €1 billion, respectively, in 2010, and is confident that it will achieve an adjusted operating • In December, Alcatel-Lucent appointed Frédéric margin above 5% in 2011 by reducing organizational Sutter as global head of Defense Markets complexity and inventory and targeting efficiencies (excluding the U.S. Federal Government). in areas such as procurement, logistics, production • Alcatel-Lucent added about 1,000 employees in and administrative expenses. The goal for 2011 is to 4Q10, mainly as transfers from managed services reduce the fixed cost structure by €300 million to deals. The vendor ended 4Q10 with 78,000 €400 million. employees.9 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 10. Income Statement TBR ALCATEL-LUCENT Consolidated Income Statement (i n € Thous a nds ) TBR CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Revenue € 3,967,000 € 3,247,000 € 3,813,000 € 4,074,000 € 4,862,000 € 4,058,750 Cost of Sales 2,514,000 2,189,000 2,436,000 2,697,000 3,103,000 2,714,360 Gross Profit € 1,453,000 € 1,058,000 € 1,377,000 € 1,377,000 € 1,759,000 € 1,344,390 SG&A 677,000 696,000 751,000 718,000 742,000 726,750 Research and Development 569,000 625,000 671,000 670,000 696,000 665,500 Operating Income € 207,000 (€ 263,000) (€ 45,000) (€ 11,000) € 321,000 (€ 47,860) Restructuring Costs 268,000 134,000 110,000 71,000 60,000 93,750 Impairment charges/Litigation & settlement 109,000 6,000 10,000 (10,000) 22,000 - Post-retirement benefit plans amendment (211,000) - - (30,000) - - Gain/(loss) on disposal of consolidated entities (99,000) 3,000 - - (65,000) - Income (Loss) from operating activities € 140,000 (€ 406,000) (€ 165,000) (€ 42,000) € 304,000 (€ 141,610) Financial Result (12,000) (71,000) (17,000) 61,000 54,000 6,750 Shares in net income (loss) of equity affiliates 5,000 26,000 7,000 4,000 2,000 9,750 EBITD € 133,000 (€ 451,000) (€ 175,000) € 23,000 € 360,000 (€ 125,110) Income Tax Expense (41,000) (47,000) (4,000) 23,000 (9,000) (9,250) Income (loss) from continuing operations € 92,000 (€ 498,000) (€ 179,000) € 46,000 € 351,000 (€ 134,360) Income (loss) from discontinued operations 3,000 (9,000) (4,000) - 1,000 - Net Income € 95,000 (€ 507,000) (€ 183,000) € 46,000 € 352,000 (€ 134,360) Net income attributable to minority interests 49,000 8,000 1,000 21,000 12,000 10,500 Net income attributable to equity holders of the parent € 46,000 (€ 515,000) (€ 184,000) € 25,000 € 340,000 (€ 134,360) PERCENTAGE OF REVENUE Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 63.4% 67.4% 63.9% 66.2% 63.8% 66.9% Gross Profit 36.6% 32.6% 36.1% 33.8% 36.2% 33.1% SG&A 17.1% 21.4% 19.7% 17.6% 15.3% 17.9% Research and Development 14.3% 19.2% 17.6% 16.4% 14.3% 16.4% Operating Income 5.2% -8.1% -1.2% -0.3% 6.6% -1.2% EBITD 3.4% -13.9% -4.6% 0.6% 7.4% -3.1% Net Income 2.4% -15.6% -4.8% 1.1% 7.2% -3.3% YEAR-TO-YEAR GROWTH Revenue -19.9% -9.8% -2.4% 10.5% 22.6% 25.0% Cost of Sales -24.0% -11.2% -6.7% 9.9% 23.4% 24.0% Gross Profit -11.7% -6.6% 6.5% 11.8% 21.1% 27.1% SG&A -16.1% -5.6% -2.3% 2.7% 9.6% 4.4% Research and Development -16.7% -3.8% 2.6% 10.0% 22.3% 6.5% Operating Income 32.7% -3.5% 65.4% 85.5% 55.1% 81.8% Net Income 102.5% -34.1% -9250.0% 125.7% 270.5% 73.5% NOTE: ADJSUTED PRO FORMA RESULTS SOURCE: TBR ESTIMATES AND ALCATEL-LUCENT10 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 11. Income Statement TBR ALCATEL-LUCENT Consolidated Income Statement TBR (i n $ Thous a nds ) CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 Est. Revenue $ 5,870,436 $ 4,490,299 $ 4,854,050 $ 5,260,944 $ 6,603,908 $ 5,512,878 Cost of Sales 3,720,261 3,027,184 3,101,093 3,482,760 4,214,711 3,686,833 Gross Profit 2,150,175 1,463,116 1,752,958 1,778,183 2,389,197 1,826,044 SG&A 1,001,836 962,503 956,043 927,186 1,007,836 987,123 Research and Development 842,016 864,317 854,201 865,202 945,356 903,929 Operating Income $ 306,322 $ (363,705) $ (57,286) $ (14,205) $ 436,005 $ (65,007) Restructuring Costs 396,591 185,310 140,033 91,686 81,496 127,338 Impairment charges/Litigation & settlement 161,300 8,297 12,730 -12,913 29,882 - Post-retirement benefit plans amendment (312,241) - - (38,740) - - Gain/(loss) on disposal of consolidated entities (146,502) 4,149 - - (88,288) - Income (Loss) from operating activities $ 207,174 $ (561,460) $ (210,049) $ (54,237) $ 412,914 $ (192,345) Financial Result (17,758) (98,186) (21,641) 78,772 73,347 9,168 Shares in net income (loss) of equity affiliates 7,399 35,956 8,911 5,165 2,717 13,243 EBITD $ 196,816 $ (623,691) $ (222,780) $ 29,701 $ 488,977 $ (169,933) Income Tax Expense (60,673) (64,997) (5,092) 29,701 (12,224) (12,564) Income (loss) from continuing operations $ 136,143 $ (688,688) $ (227,872) $ 59,402 $ 476,753 $ (182,497) Income (loss) from discontinued operations 4,439 (12,446) (5,092) - 1,358 - Net Income $ 140,583 $ (701,134) $ (232,964) $ 59,402 $ 478,111 $ (182,497) Net income attributable to minority interests 72,511 11,063 1,273 27,118 16,299 14,262 Net income attributable to equity holders of the parent $ 68,072 $ (712,197) $ (234,237) $ 32,284 $ 461,812 $ (182,497) PERCENTAGE OF REVENUE Revenue 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of Sales 63.4% 67.4% 63.9% 66.2% 63.8% 66.9% Gross Profit 36.6% 32.6% 36.1% 33.8% 36.2% 33.1% SG&A 17.1% 21.4% 19.7% 17.6% 15.3% 17.9% Research and Development 14.3% 19.2% 17.6% 16.4% 14.3% 16.4% Operating Income 5.2% -8.1% -1.2% -0.3% 6.6% -1.2% EBITD 3.4% -13.9% -4.6% 0.6% 7.4% -3.1% Net Income 2.4% -15.6% -4.8% 1.1% 7.2% -3.3% YEAR-TO-YEAR CHANGE Revenue -19.9% -9.8% -2.4% 10.5% 22.6% 25.0% Cost of Sales -24.0% -11.2% -6.7% 9.9% 23.4% 24.0% Gross Profit -11.7% -6.6% 6.5% 11.8% 21.1% 27.1% SG&A -16.1% -5.6% -2.3% 2.7% 9.6% 4.4% Research and Development -16.7% -3.8% 2.6% 10.0% 22.3% 6.5% Operating Income 32.7% -3.5% 65.4% 85.5% 55.1% 81.8% Net Income 102.5% -34.1% -9250.0% 125.7% 270.5% 73.5% SOURCE: TBR ESTIMATES AND ALCATEL-LUCENT11 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 12. Balance Sheet TBR ALCATEL-LUCENT Consolidated Balance Sheets TBR (i n € Thous a nds ) CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 ASSETS Goodwill and intangible assets, net € 6,382,000 € 6,590,000 € 6,937,000 € 6,407,000 € 6,426,000 Goodwill 4,168,000 4,331,000 4,583,000 4,311,000 4,370,000 Intangible assets, net 2,214,000 2,259,000 2,354,000 2,096,000 2,056,000 Property, Plant & Equipment, Net 1,260,000 1,282,000 1,309,000 1,207,000 1,311,000 Share in net assets of equity affiliates 60,000 58,000 57,000 56,000 9,000 Other non-current financial assets, net 392,000 452,000 461,000 430,000 400,000 Deferred tax assets 836,000 892,000 930,000 922,000 948,000 Prepaid pension costs 2,400,000 2,602,000 2,902,000 2,803,000 2,746,000 Other non-current assets 314,000 223,000 306,000 220,000 257,000 Total Non-Current Assets € 11,644,000 € 12,099,000 € 12,902,000 € 12,045,000 € 12,097,000 Inventories and Work in Progress, net 1,624,000 2,186,000 2,669,000 2,567,000 2,295,000 Trade receivables and related accounts, net 3,221,000 3,287,000 3,467,000 3,323,000 3,664,000 Advances and progress payments 93,000 81,000 74,000 88,000 75,000 Other current assets 960,000 1,105,000 1,248,000 1,126,000 885,000 Assets held for sale 51,000 56,000 80,000 219,000 3,000 Current income taxes 157,000 162,000 187,000 161,000 168,000 Marketable securities, net 1,993,000 1,632,000 1,788,000 1,197,000 649,000 Cash and cash equivalents 3,577,000 3,675,000 3,053,000 3,227,000 5,040,000 Total Current Assets € 12,204,000 € 12,184,000 € 12,566,000 € 11,908,000 € 12,779,000 Total Assets € 23,848,000 € 24,283,000 € 25,468,000 € 23,953,000 € 24,876,000 LIABILITIES AND EQUITY Shareholders equity- attributable to the equity holders of the parent € 3,740,000 € 3,514,000 € 2,473,000 € 2,377,000 € 3,545,000 Minority Interest 569,000 615,000 675,000 631,000 660,000 Total Shareholders Equity € 4,309,000 € 4,129,000 € 3,148,000 € 3,008,000 € 4,205,000 Pensions, retirement indemnities and other post- retirement benefits 5,043,000 5,158,000 6,596,000 6,014,000 5,090,000 Bonds and Notes Issues, long-term 4,084,000 3,428,000 3,710,000 3,479,000 4,037,000 Other long-term debt 95,000 89,000 61,000 61,000 75,000 Deferred tax liabilities 1,058,000 1,168,000 1,232,000 1,127,000 1,126,000 Other non-current liabilities 209,000 253,000 229,000 247,000 259,000 Total Non-Current Liabilities € 10,489,000 € 10,096,000 € 11,828,000 € 10,928,000 € 10,587,000 Provisions 2,008,000 2,152,000 2,265,000 1,969,000 1,858,000 Current portion of long-term debt 576,000 1,356,000 1,040,000 1,146,000 1,266,000 Customers Deposits and Advances 639,000 782,000 858,000 915,000 803,000 Trade Payables and Related Accounts 3,926,000 4,033,000 4,392,000 4,173,000 4,325,000 Current income tax liabilities 72,000 84,000 116,000 68,000 137,000 Other current liabilities 1,763,000 1,651,000 1,821,000 1,746,000 1,695,000 Total Current Liabilities € 9,050,000 € 10,058,000 € 10,492,000 € 10,017,000 € 10,084,000 Total Liabilities and Shareholders Equity € 23,848,000 € 24,283,000 € 25,468,000 € 23,953,000 € 24,876,000 FINANCIAL RATIOS Day Sales Outstanding 73.08 91.11 81.83 73.41 67.82 Turns on Inventory 5.76 4.60 4.01 4.12 5.11 Days Inventory Outstanding 63.37 79.41 90.93 88.58 71.49 Fixed Asset Turnover 12.71 10.22 11.77 12.95 15.45 Days Cash Outstanding 126.37 147.10 114.26 97.73 105.31 Total Asset Turnover 0.66 0.54 0.61 0.66 0.80 Debt/Asset Ratio 0.42 0.40 0.41 0.42 0.43 Current Ratio 2.06 1.93 1.86 1.83 1.94 Return on Assets 0.4% -2.1% -0.7% 0.2% 1.4% Return on Equity 1.7% -11.5% -4.5% 1.2% 9.4% Annualized Revenue per Employee - Euro € 202,961 € 201,980 € 202,104 € 205,304 € 212,925 Annualized Revenue per Employee - USD $ 300,346 $ 279,320 $ 257,283 $ 265,119 $ 289,210 Employee Count 71,717 71,500 74,000 77,000 78,000 Exchange Rate ($US to Euro) 1.480 1.383 1.273 1.291 1.358 SOURCE: TBR ESTIMATES AND ALCATEL-LUCENT12 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
  • 13. Balance Sheet TBR ALCATEL-LUCENT Consolidated Balance Sheets TBR (i n $ Thous a nds ) CALENDAR QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 FISCAL QUARTER 4Q09 1Q10 2Q10 3Q10 4Q10 ASSETS Goodwill and intangible assets, net $ 9,444,195 $ 9,113,358 $ 8,830,986 $ 8,273,654 $ 8,728,242 Goodwill 6,167,879 5,989,371 5,834,281 5,566,993 5,935,639 Intangible assets, net 3,276,316 3,123,987 2,996,705 2,706,661 2,792,603 Property, Plant & Equipment, Net 1,864,570 1,772,887 1,666,392 1,558,655 1,780,692 Share in net assets of equity affiliates 88,789 80,209 72,563 72,315 12,224 Other non-current financial assets, net 580,088 625,074 586,865 555,279 543,308 Deferred tax assets 1,237,127 1,233,553 1,183,915 1,190,621 1,287,640 Prepaid pension costs 3,551,562 3,598,324 3,694,323 3,619,643 3,729,809 Other non-current assets 464,663 308,388 389,546 284,096 349,075 Total Non-Current Assets $ 17,230,994 $ 16,731,794 $ 16,424,589 $ 15,554,263 $ 16,430,990 Inventories and Work in Progress, net 2,403,223 3,023,035 3,397,708 3,314,885 3,117,229 Trade receivables and related accounts, net 4,766,492 4,545,616 4,413,583 4,291,143 4,976,701 Advances and progress payments 137,623 112,015 94,204 113,638 101,870 Other current assets 1,420,625 1,528,112 1,588,737 1,454,056 1,202,069 Assets held for sale 75,471 77,443 101,842 282,805 4,075 Current income taxes 232,331 224,031 238,056 207,907 228,189 Marketable securities, net 2,949,276 2,256,904 2,276,172 1,545,741 881,517 Cash and cash equivalents 5,293,307 5,082,184 3,886,550 4,167,174 6,845,680 Total Current Assets $ 18,059,692 $ 16,849,341 $ 15,996,852 $ 15,377,348 $ 17,357,330 Total Assets $ 35,290,686 $ 33,581,134 $ 32,421,442 $ 30,931,611 $ 33,788,321 LIABILITIES AND EQUITY Shareholders equity- attributable to the equity holders of the parent $ 5,534,517 $ 4,859,536 $ 3,148,195 $ 3,069,529 $ 4,815,067 Minority Interest 842,016 850,488 859,293 814,839 896,458 Total Shareholders Equity € 6,376,533 € 5,710,024 € 4,007,488 € 3,884,369 € 5,711,525 Pensions, retirement indemnities and other post- retirement benefits 7,462,719 7,133,035 8,396,884 7,766,155 6,913,594 Bonds and Notes Issues, long-term 6,043,574 4,740,606 4,722,929 4,492,593 5,483,335 Other long-term debt 140,583 123,079 77,655 78,772 101,870 Deferred tax liabilities 1,565,647 1,615,236 1,568,369 1,455,347 1,529,412 Other non-current liabilities 309,282 349,876 291,523 318,962 351,792 Total Non-Current Liabilities $ 15,521,805 $ 13,961,831 $ 15,057,359 $ 14,111,829 $ 14,380,003 Provisions 2,971,473 2,976,016 2,883,405 2,542,660 2,523,665 Current portion of long-term debt 852,375 1,875,222 1,323,948 1,479,883 1,719,570 Customers Deposits and Advances 945,603 1,081,433 1,092,257 1,181,582 1,090,691 Trade Payables and Related Accounts 5,809,763 5,577,265 5,591,133 5,388,787 5,874,517 Current income tax liabilities 106,547 116,164 147,671 87,812 186,083 Other current liabilities 2,608,918 2,283,180 2,318,181 2,254,690 2,302,267 Total Current Liabilities $ 13,392,348 $ 13,909,280 $ 13,356,595 $ 12,935,413 $ 13,696,793 Total Liabilities and Shareholders Equity $ 35,290,686 $ 33,581,134 $ 32,421,442 $ 30,931,611 $ 33,788,321 FINANCIAL RATIOS Day Sales Outstanding 73.08 91.11 81.83 73.41 67.82 Turns on Inventory 5.76 4.60 4.01 4.12 5.11 Days Inventory Outstanding 63.37 79.41 90.93 88.58 71.49 Fixed Asset Turnover 12.71 10.22 11.77 12.95 15.45 Days Cash Outstanding 126.37 147.10 114.26 97.73 105.31 Total Asset Turnover 0.66 0.54 0.61 0.66 0.80 Debt/Asset Ratio 0.42 0.40 0.41 0.42 0.43 Current Ratio 2.06 1.93 1.86 1.83 1.94 Return on Assets 0.4% -2.1% -0.7% 0.2% 1.4% Return on Equity 1.7% -11.5% -4.5% 1.2% 9.4% Average Annual Revenue per Employee - USD $ 300,346 $ 279,320 $ 257,283 $ 265,119 $ 289,210 Employee Count 71,717 71,500 74,000 77,000 78,000 Exchange Rate ($US to Euro) 1.480 1.383 1.273 1.291 1.358 SOURCE: TBR ESTIMATES AND ALCATEL-LUCENT13 Alcatel-Lucent 4Q10 Initial Response | Network Business Quarterly ©2011 Technology Business Research, Inc.
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