Alcatel-Lucent provides preliminary unaudited results for first quarter 2007

Alcatel-Lucent (Euronext Paris and NYSE: ALU) today announced its preliminary results for first quarter 2007 adjusted results and provided an update on its integration process and business activities.

Patricia Russo, CEO of Alcatel-Lucent said: “It has been four months since we completed the merger, and we are making good progress in terms of our integration. The technology choices have been finalized and the combined company’s portfolio communicated to our customers. Concerning our cost saving plans, the net headcount reductions, before recently announced managed services contract wins, are approximately 1,900 during the quarter, 15% of the 3-year target of 12,500. Associated cost savings will be incorporated in our operating results going forward.

As previously stated, we anticipated that some of the factors which affected our business in the fourth quarter 2006 would continue in the early months of the year leading to some revenue decline. In particular, while parts of our businesses performed well, our first quarter results were impacted by lower volumes in traditional wireless and core networks at a time when considerable investments were made in the next generation of these technologies.

We continued to gain sales momentum during the quarter and increasingly recognized the benefits of our integration. At the end of the quarter, our book to bill stands at 1.3x, which leads us to remain confident in our ability to resume growth as the year progresses. In fact, we have announced a number of contracts during the quarter, including the USD 6 billion deal with Verizon Wireless, which represents one of the first major success stories reflecting the combined company’s strengths. We also signed a new strategic UMTS/HSPA contract with SFR in France, the first in Western Europe since the acquisition of the 3G UMTS radio activities of Nortel. Additionally, China Mobile selected Alcatel-Lucent and its partner Datang for its 3G/TD-SCDMA network. These wins speak to the portfolio decisions we have made and the relationships we continue to enjoy with some of the world’s largest service providers.

We will comment further on our outlook for 2007 when we announce earnings with more detail on May 11.”

Revenues for the first quarter of 2007 are estimated to be approximately Euro 3.9 billion, a year over year decline of around (8)% at a constant Euro/USD exchange rate or (12)% at current rate. Compared to a strong first quarter 2006, the lower volume is primarily attributable to wireless radio and core networks impacting the Wireless and Convergence businesses globally. The wireless decline is largely driven by lower volumes especially in 2G in some emerging markets.

The adjusted operating income (loss) (1) is estimated to be at approximately Euro (260) million, (7)% of sales, half of which is attributed to unusual significant items. Overall, the loss in the quarter resulted from lower revenues, mix effect as well as investments we are making in WCDMA and in the converged core portfolio. In the case of WCDMA, we are transitioning some of our customer base consistent with our going forward portfolio. As a result, revenues were low while synergy benefits of the former Alcatel, Lucent and Nortel WCDMA businesses have not yet been fully realized. We believe these are important strategic investments to make that will pay off in the future. In the case of the converged core, the legacy core revenue continued to decline while we invest in advance of the market impact of the IP network transformations underway. The adjusted operating income (loss)compares with an adjusted pro-forma operating income (loss) of Euro 246 million in the first quarter 2006.

In addition, following the successful closing of the Thales transaction, a capital gain before taxes of around Euro 780 million is expected to be booked in the first quarter 2007 results.

The quarterly earnings press and analyst conference call will take place on May 11 at 1:00 p.m. CET (7:00 a.m. EST) and will be broadcast live over the Internet at www.alcatel-lucent.com/1q2007.

(1) Income (loss) from operating activities before restructuring costs, impairment of intangible assets and gain (loss) on disposal of consolidated entities, excluding impacts from follow-up of Lucent’s purchase price allocation.