Alcatel reports first quarter 2004 results

News

Sales about stable year over year; Gross margin up at 36.6%; Income from operations at Euro 80 million at 2.9% of sales, up 8 points year over year; EPS (pre goodwill) positive at Euro 0.18, and Euro 0.10 after goodwill

Alcatel's Board of Directors (Paris: CGEP.PA and NYSE: ALA) reviewed and approved first quarter 2004 results. Sales were registered at Euro 2,740 million compared with Euro 2,828 million in the first quarter 2003, down 3% at actual exchange rate and up 2% at a constant rate. The gross margin improved to 36.6% compared to 30.3% in the first quarter last year. Income from operations amounted to Euro 80 million, with all business segments positive, compared with a loss of Euro (150) million in the same period last year. Net income (pre-goodwill) for the quarter was registered at Euro 234 million or diluted Euro 0.18 per share (USD 0.22 per ADS) and net income after goodwill at Euro 134 million or diluted Euro 0.10 per share (USD 0.12 per ADS).

Serge Tchuruk, Chairman and CEO summarized the Board's observations:
"Our performance in Q1 2004 is a clear confirmation that Alcatel is on the right track. With the sales decline stopping, our margins can now benefit from the intense restructuring which has been carried out. We are pleased to see, in this traditionally weak quarter, positive operating income generated in all segments and our earnings per share getting back in the black (even without the capital gain of the SAFT divestment, the pre goodwill EPS is at breakeven).

"Our key strategic choices have been validated by recent accomplishments. Partnerships are being set up in areas where consolidation can generate future value while suppressing the burden on our operating income from formerly stand-alone operations. We are confident that our cooperation with Draka, creating the number 2 world player in fiber optics, and with TCL, creating a major force in cellular handsets, will change the world landscape in these markets. In parallel, our order intake reflects the pay off of our focus on next generation technologies which can differentiate Alcatel: their growing traction is largely driving our positive revenue outlook for the rest of the year, in a market which otherwise remains uncertain. Private Communications will continue to benefit from advances in IP telephony, interaction management and our world leading technology in rail control and communication networks. The Evolium range of solutions for mobile equipment and applications will be further enhanced with unique features supporting a projected growth in sales for the full year. Finally, breakthroughs in IP service routing, next generation optical systems, multimedia wireline solutions for VoIP and triple play applications are set to sustain Fixed Communications revenues."

"At this point, we are upgrading our expectations of year over year revenue growth going forward, both for the coming quarters and for the full year 2004. For the second quarter, as well as for full year, we expect high single digit year over year sales growth at a constant Euro/Dollar rate, which translates into significant growth at the current rate. EPS (pre-goodwill) should be positive for the second quarter and should become substantial for the full year."

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