Q Earnings. November 4, 2010

Transcription

1 Q Earnings November 4, 2010

2 Introductory Remarks Ben Verwaayen - CEO

3 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, an adjusted operating margin in the low to mid single-digit (between 1% and 5%) for Words such as expects, anticipates, guidance, targets, projects, intends," plans, believes, estimates, aim, goal, outlook, momentum, continue, variations of such words and similar expressions are intended to identify such forwardlooking 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: our ability to operate effectively in a highly competitive industry with many participants; our ability to keep pace with technological advances and correctly identify and invest in the technologies that become commercially accepted; 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; fluctuations in the telecommunications market; 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 contract manufacturers to supply products we sell and in particular to source components in a tight market; the social, political and economic risks of our 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; 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; customer demand for Alcatel-Lucent s products and services; control of costs and expenses; international growth; conditions and growth rates in the telecommunications industry; 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, 2009, 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. 3 Q Earnings

4 Q Highlights Continuing progress in our transformation journey Back to top-line growth & improved profitability Strong market traction and customer endorsement Full year guidance maintained Strong sequential increase expected for top-line & profits 4 Q Earnings

5 Q Highlights: Networks Strong momentum accross all divisions Acceleration of growth in IP/MPLS with double-digit growth in all regions Turning point for Terrestrial Optics with growth in WDM, Intelligent Optical Network & microwave transmission In Wireless, double-digit growth in all major technologies: W-CDMA, CDMA & GSM Improvement in Wireline driven by VDSL & PON 5 Q Earnings

6 Q Highlights: Networks Invest to win strategy paying off Strong growth and increased share Next Gen. Product Sales: +23% YoY+ 14% QoQ of our next generation product sales* 42% % % 36% % % % 28% Q Q Q Q Q Q Q in % of Networks Sales in M Euros *Products supporting our HLN strategy: IP, DWDM, WT, WCDMA, LTE, IPDSLAM, FTT&OLT, IMS Core 6 Q Earnings

7 High Leverage Network TM Strong market traction and customer endorsement Highlights from Q3 41% of Q3 Networking portfolio sales on HLN-related products IP Routing: Best quarter ever, with 35% YoY revenue growth; N 2 position with 20% market share N 1 in IP/Ethernet cell site router/gateways Growing wireless market share: 16.3% in Q2 (from 13.6% in Q2 09) WCDMA: Best quarter ever, with 33% YoY revenue growth Converged VDSL/GPON with TDC Strong momentum around 100G, with: 1 st 100G combined IP/Optical deployments (360networks, PT Telkom) 100GE growing shipments (China Telecom, Portugal Telecom, Verizon) 1 st single-carrier 100G coherent WDM deployments (Etisalat, Softbank, T-Systems) LTE: 7 contracts & 58 trials Small Cells: 14 contracts & 20+ trials Driving copper & fiber innovations: Vectoring, Bonding & Phantom mode market trials (Turk Telecom) Broadband Innovation of the Year (BB InfoVision Awards) with Phantom Mode World 1 st 10G symmetrical GPON market trials (Verizon, Portugal Telecom) 7 Q Earnings

8 Q Highlights: Applications & Services Resumed growth and profitability improved Solutions for digital content delivery gaining momentum in Network applications Digital Media Store for Telus, Mobile advertising with Etisalat Strong growth in data networking for Enterprise New 10GigE switch released Recent wins & large contracts in Strategic Industries driving growth in Services 8 Q Earnings

9 Q Highlights By geographies: rising demand across all regions +22% yoy growth in North America Wireless & IP being the growth engine India & China driving recovery in APAC Sales doubling in India Growth in Eastern Europe Driven by Russia Improvement in Western Europe 9 Q Earnings

10 Q3 Operational highlights Gross margin driven by product & geographic mix On track for fixed costs reduction Level of inventories maintained to support top-line growth 10 Q Earnings

11 Outlook Significant top-line sequential increase Strong leverage effect on profitability Full-year 2010 outlook maintained 11 Q Earnings

12 Q Results Paul Tufano -CFO

13 Q3 10 Adjusted P&L In Euro Million Q3 '10 Q3 '09 YoY Q2 '10 QoQ Revenues 4,074 3, % 3, % Gross profit 1,377 1, ,377 0 Gross margin 33.8% 33.4% 0.4 pt 36.1% -2.3 pt R&D Gross (633) (573) 10.5% (621) 1.9% in % of revenues 15.5% 15.5% 0.0 pt 16.3% -0.7 pt Capitalization / Other 4 1 (9 ) R&D Net (629) (572) 10.0% (630) -0.2% in % of revenues 15.4% 15.5% -0.1 pt 16.5% -1.1 pt SG&A (687) (671) 2.4% (719) -4.5% in % of revenues 16.9% 18.2% -1.3 pt 18.9% -2.0 pt Total OPEX (1,316) (1,243) 5.9% (1,349) -2.4% in % of revenues 32.3% 33.7% -1.4 pt 35.4% -3.1 pt Op. income (loss) 61 (11) Operating margin 1.5 % -0.3 % 1.8 pt 0.7 % 0.8 pt 13 Q Earnings

14 Consistent & continuous gross margin improvement Gross margin (%) & Sales from 2007* % % % % % % % % % Q4-07 Q1-08 Q2-08 Q3-08 Q4-08 Q1-09 Q2-09 Q3-09 Q4-09 Q1-10 Q2-10 Q3-10 Sales *Gross margin as a % of sales of the last 4 trailing quarters GM as % of sales 14 Q Earnings

15 Q3 10 Revenue Breakdown by Operating Segments In Euro Million YoY YoY QoQ QoQ Q3 '10 Q3 '09 Q2 '10 Current Constant * Current Constant * Revenues Networks 2,459 2, % 1.8% 2, % 6.5% IP % 19.4% % 15.4% Optics % -13.8% % 4.3% Wireless 1, % 14.0% 1, % 3.9% Wireline % -9.4% % 8.5% Other & eliminations (22) (22) 0.0% nm (23) -4.3% nm Applications % -0.8% % 2.5% Enterprise Applications % 1.4% % -1.6% Networks Applications % -3.5% % 10.1% Other & eliminations (6) (5) nm nm (4) nm nm Services % 1.8% % 7.7% Other & Eliminations nm nm 137 nm nm Total 4,074 3, % 2.9% 3, % 6.8% * YoY & QoQ change, at constant FX rate & perimeter 15 Q Earnings

16 Q3 10 Operating Income Breakdown by Operating Segments In Euro Million YoY QoQ Q3 '10 Q3 '09 Q2 '10 Current Current Adj. operating income (loss) Networks 31 (26) nm 55 nm in % of revenues 1.3% -1.2% 2.4 pt 2.4% -1.1 pt Applications 15 0 nm (17) nm in % of revenues 3.0% 0.0% 3.0 pt -3.5% 6.5 pt Services nm 19 nm in % of revenues 3.0% 4.4% -1.4 pt 2.2% 0.8 pt Other & Eliminations (13) (23) nm (29) nm Total 61 (11 ) nm 28 nm 16 Q Earnings

17 Q3 10 Revenues Geographical Breakdown Q3 10 Total Revenue: 4,074M ~30% ~36% Europe North America Q3 09 Total Revenue: 3,687M ~33% ~33% Europe North America ~13% RoW ~21% Asia Pacific ~14% RoW ~20% Asia Pacific YoY Revenue Δ (in local currencies) North America 11 % Asia Pacific 7 % Europe 0 % RoW -7 % 17 Q Earnings

18 Balance Sheet Highlights In Euro Million Sept. 30, '10 June 30, '10 Sept. 30, '09 Goodwill 4,311 4,583 4,129 Other intangible assets 2,096 2,354 2,249 Other non-current assets (excl. market. sec & pensions) 2,762 2,985 2,921 Operating working capital ,165 Net assets/(liabilities) held for sale Net cash / (debt) (190) Shareholders equity - Group share 2,377 2,473 3,603 Minority interests Net Pensions & OPEB 3,211 3,694 2,906 Non current liabilities (excl.debt & pensions) 1,373 1,460 1,335 Reserves 1,969 2,265 2,074 Other current liabilities/(assets) net

19 Operating Working Capital In Euro Million Sept 30, 2010 June 30, 2010 Sept 30, 2009 Net inventories* 2,567 2,669 2,171 Net receivables* 3,323 3,467 3,481 Payables & progress payments (5,000) (5,176) (4,487) OWC as reported ** ,165 As % of revenues (12 months) 5.9% 6.5% 7.2% Trailing 4 quarter revenues 15,101 14,713 16,144 OWC before sales of receivables 1,524 1,601 1,784 As % of revenues (12 months) 10.1% 10.9% 11.1% * Including amounts related to construction contracts ** Reserves on construction contracts have been reclassified to Provisions in the statement of financial position 19 Q Earnings

20 Cash Flow Statement In Euro Million Q3 '10 Q2 '10 Q3 '09 Net (debt)/cash at beginning of period Adjusted operating income (11) Depreciation & Amort; OP non cash; other Op. Cash Flow before change in WCR* Change in operating WCR (82) (202) 430 Change in other WCR (61) Operating Cash Flow** 193 (58) 739 Interest (92) (45) (41) Taxes (61) (46) (20) Cash contribution to pension & OPEB (56) (64) (37) Restructuring cash outlays (73) (76) (122) Cash flow from operating activities (89) (289) 519 Capital expenditures (incl. R&D cap.) (184) (146) (157) Free Cash Flow (273) (435) 362 Discontinued, Cash from financing & Forex (24) Change in net(debt)/cash position (297) (405) 564 Net (debt)/cash at end of period (190) * Before changes in working capital, interest/tax paid, restructuring cash outlay and pension & OPEB cash outlay **Operating cash flow now defined as cash generated from operations after changes in working capital but before interest/tax paid, restructuring cash outlay and pension & OPEB outlay 20 Q Earnings

21 Funded Status of Alcatel-Lucent Pensions & OPEB (IFRS) In Euro Million Sept 30, '10 June 30, '10 Sept 30, '09 Pensions OPEB Pensions OPEB Pensions OPEB Fair value of plan assets 27, , , (In USD Million) 36, , , Benefit obligations (25,505) (3,315) (27,123) (3,649) (22,957) (3,090) (In USD Million) (34,809) (4,524) (33,283) (4,478) (33,616) (4,525) 1,512 (2,921) 1,357 (3,159) 1,423 (2,690) Funded Status (1,409) (1,802) (1,267) (In USD Million) (1,923) (2,211) (1,855) Asset ceiling (1,802) - (1,892) - (1,639) - Net balance sheet (3,211) (3,694) (2,906) 21 Q Earnings

22 Outlook 2010 Guidance For 2010, Alcatel-Lucent continues to expect nominal growth (defined as between 0% and 5%) for the telecommunications equipment and related services market. For 2010, Alcatel-Lucent aims to reach an adjusted operating margin in the low to mid single-digits (defined as between 1% and 5%). 22 Q Earnings

23 Questions & Answers

24 Additional Information

25 Q Reported and Adjusted Results In Euro Million Q3 '10 Reported PPA impacts Q3 '10 Adjusted Revenues 4, ,074 Gross profit 1, ,377 SG&A (718) 31 (687) Net R&D (670) 41 (629) Operating income (loss) (11) Restructuring (71) 0 (71) Post-retirement benefit plan amendment Litigations Financial income (loss) Share in net income of equity affiliates Income Tax 23 (29) (6) Income from discontinued operations Net Income Minority Interest (21) (21) Net Income (Group share) Diluted EPS, in # shares (Million) 2, , Q Earnings

26 Restatement of 2009 Breakdown by Operating Segments In Euro Million Revenues Q1 '10 Q2 '10 Q3 '10 Q1 '09 Q2 '09 Q3 '09 Q4 '09 FY 2009 Networks 1,928 2,304 2,459 2,219 2,384 2,231 2,242 9,076 IP ,177 Optics ,854 Wireless 819 1,021 1, ,547 Wireline ,619 Other & eliminations (28) (23) (22) (34) (26) (22) (39) (121) Applications ,914 Enterprise Applications ,170 Networks Applications Other & eliminations (4) (4) (6) (5) (9) (5) (14) (33) Services ,030 3,569 Other & Eliminations Total 3,247 3,813 4,074 3,598 3,905 3,687 3,967 15,157 Adj. operating income (loss) Q1 '10 Q2 '10 Q3 '10 Q1 '09 Q2 '09 Q3 '09 Q4 '09 FY 2009 Networks (128) (154) (136) (26) 19 (297) in % of revenues -6.6% 2.4% 1.3% -6.9% -5.7% -1.2% 0.8% -3.3% Applications (27) (17) 15 (55) (30) 0 80 (5) in % of revenues -6.5% -3.5% 3.0% -12.4% -6.5% 0.0% 15.0% -0.3% Services (40) (63) in % of revenues -5.2% 2.2% 3.0% -7.9% 10.0% 4.4% 13.7% 5.7% Other & Eliminations 0 (29) (13) (23) Total (195) (254) (62) (11) 271 (56) 26 Q Earnings

27 Q3 Q Earnings