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AlcaLu Reports Q4 Loss of €1.37B

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PARIS -- Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced 2012 full year results in line with its guidance and costs savings close to Euro 650 million, which is ahead of plan, and, in the fourth quarter of 2012, a free cash-flow of Euro 355 million with an adjusted operating margin of 2.9%. Ben Verwaayen, CEO Alcatel-Lucent, commented: “Our fourth quarter reflects the early progress of The Performance Program announced last July. We announced clear choices on where we would operate, how we would operate and where we would differentiate.” “We have seen progress on all these choices, and close 2012 ahead on our cost reduction plans. We have addressed half of the previously margin-diluting Managed Services contracts, and show continued and strong growth in IP and Next Generation Wireless. We can see a clear statement of customer confidence through growth in both our order book and backlog.” “In addition, we completed a Euro 2 billion financing which enables us to extend our near-term maturities, stabilizes our balance sheet and provides us with the flexibility to finalize The Performance Program.” “Using assumptions consistent with those disclosed in the documentation of our secured loan, we performed our annual impairment test and booked a non cash charge of Euro 1.4 billion related to the depreciation of goodwill and fixed assets, and the corresponding impact on deferred tax.” Mr Verwaayen added: “Through 2013 we will remain focused on completing The Performance Program. We will deploy our resources to customer relationships where we are a true partner and in product areas where we can drive an economic return for our shareholders.” MAIN POINTS
Fourth quarter revenue increased 13.8% sequentially and decreased -1.3% year-over-year to Euro4,096 million. At constant currency exchange rates and perimeter, revenues increased 16.2% sequentially and decreased 3.9% year-over-year. In the quarter, Networks witnessed a mid single-digit decline year-over-year, a substantially lower rate than in the first three quarters of the year. The IP business continued its growth trajectory, posting a double-digit increase and its highest revenues level ever, while Wireless stabilized after four quarters of double digit declines, driven by US service providers stronger spending. Our Optics business declined at a double digit rate, driven by muted spending in terrestrial and low point in submarine. Resulting from a high comparison basis, our Wireline business declined at a low double digit rate in the fourth quarter. The Software, Services & Solutions (S3) segment shifted to positive territory, benefitting from Network Applications’ strong performance. Finally, our Enterprise segment posted a mid single-digit decline. From a geographic standpoint, also adjusted for constant currency and compared to the year ago period, North America posted a 10% growth rate. Mixed trends in Asia Pacific resulted in a low double-digit decline, traction in Japan being offset by continued low activity in China. Cautious spending persisted in Europe, which also declined at a low double-digit rate. Rest of world was resilient, driven by continuous traction in Brazil and by Middle East and Africa, which returned back to growth after several quarters of decline. Adjusted operating income of Euro 117 million or 2.9% of revenue. Gross margin came in at 30.4% of revenue for the quarter, compared to 34.4% in the year ago quarter and 27.9% in the third quarter 2012. The year-over-year decline in gross margin mainly results from unfavorable product and business mix. The sequential increase in gross margin mainly results from higher volumes and product and customer mix, especially in our S3 segment. Operating expenses decreased 1.7% year-over-year on a reported basis and adjusted for constant currency decreased 3.7% year-over-year, reflecting results of our actions to streamline our cost structure, strongly focusing on SG&A expenses (decreasing 7.8% year-over-year on a reported basis and adjusted for constant currency decreased 10.1%). On a sequential basis, operating expenses were flat as reported and slightly increased 1.5% at constant currency, driven by an increase in R&D (+2.3% quarter-over-quarter when adjusted for constant currency). Fourth quarter reported net loss (group share) of Euro (1,372) million or Euro (0.60) per share. This includes restructuring charges of Euro (247) million, a post-retirement benefit plan amendment gain of Euro 169 million, a net financial gain of Euro 97 million, an impairment charge of Euro (894) million resulting from the impairment test review of our assets carried out at the end of the fourth quarter 2012, using assumptions consistent with those disclosed in the documentation of our credit facilities. It also includes a decrease of Euro (514) million of recognized deferred tax based on assumptions consistent with those used for the annual goodwill impairment test. The reported net loss (group share) also includes Purchase Price Adjustments (PPA entries in relation to the Lucent business combination) of Euro (255) million pre-tax or Euro (163) million after tax. Net (debt)/cash of Euro 126 million, versus Euro (84) million of net cash as of September 30, 2012. The sequential increase in net cash of Euro 210 million primarily reflects a positive operating cash-flow of Euro 702 million, interest paid of Euro (6) million, taxes paid of Euro (8) million, restructuring cash outlays of Euro (85) million, contribution to pensions and OPEB of Euro (62) million and capital expenditures of Euro (186) million. The positive operating cash-flow of Euro 702 million results from an adjusted operating income of Euro 117 million and from a strong positive contribution from the operating working capital requirements of Euro 259 million. The level of receivables sold without recourse amounted to Euro 1,111 million, compared to Euro 958 million as of September 30, 2012. Alcatel-Lucent

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