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Alcatel-Lucent provides an update on its business activities


Alcatel-Lucent (Euronext Paris and NYSE: ALU) today revised its full year 2007 revenue outlook and confirmed its previous statements regarding synergy targets for the year.

Alcatel-Lucent now expects its full year 2007 revenue growth to be flat to slightly up at a constant Euro/USD exchange rate1. Alcatel-Lucent had previously estimated that its revenue would grow in the mid single digits at a constant rate. As of today, Alcatel-Lucent’s revenue for the third quarter 2007 is estimated to grow slightly compared to the second quarter 2007 at a constant Euro/USD exchange rate. The company’s revenue for the fourth quarter 2007 is still expected to ramp-up strongly over the third quarter 2007. Additionally, the change in revenue mix is expected to negatively impact the profitability of the company, especially in the current quarter. For the third quarter 2007, the operating income (loss)2 is expected to be around breakeven.

This downward revision in the revenue forecast is based on the most recent and updated discussions with some wireless customers in North America. Alcatel-Lucent is now seeing a change in capital spending with those customers in 2007, compared to what it had anticipated. As a result, the company is not seeing the projected volume changes that would have mitigated the ongoing pricing pressures it is experiencing. In other regions and businesses, in particular wireline, enterprise and Asia-Pacific revenue performance continues to be strong.

The company continues to execute on its integration plans and is planning to achieve its synergy related pre-tax savings of Euro 600 million this year. As the company has previously said for this year, it will not retain its gross margin savings due to competitive market conditions but expects it will retain most of its operating expense savings on a comparable basis3.

Alcatel-Lucent continues to expect a strong sequential revenue growth in the fourth quarter, driven by IP transformation, broadband deployment and associated services.

Patricia Russo, Alcatel-Lucent CEO said, “Given ongoing dynamics in the rapidly changing telecom industry, the company is taking steps to accelerate the execution of its current restructuring program and to implement additional focused cost reduction plans in markets which require further actions to be taken.

While the company acknowledges that it is competing in a challenging market environment and executing a complex merger, it remains confident that it has the right combination of people and assets to position the company as a leading player in the industry.”

Alcatel-Lucent will provide an update regarding its plans when announcing third quarter earnings on October 31, 2007.

1 - Compared to 2006 pro-forma revenue

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

3 - Adjusted for the Nortel UMTS and Riverstone acquisitions, Euro/USD exchange rate, R&D capitalization & one-offs.


Except for historical information, all other information in this press release 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 (i) the expected revenue growth for the third and fourth quarters of 2007 and full year 2007 based on constant Euro/USD exchange rates, (ii) the negative impact of the change in revenue mix on profitability, (ii) projected breakeven operating income (loss) for the third quarter 2007, (iv) performance projections in regions outside North America and in businesses other than wireless, (v) our anticipated merger synergies in 2007 and (vi) our expected operating expense savings for 2007. Words such as “expects,” “anticipates,” “targets,” “projects,” “intends,” “plans,” “believes,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking 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 achieving synergies and cost savings; 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; 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; whether Alcatel-Lucent can continue to obtain product cost improvements and to implement cost cutting and restructuring programs and whether these efforts will achieve their expected benefits, including improvements in operating income (loss), among other benefits; 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 Form 20-F for the year ended December 31, 2006, 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 news release, whether as a result of new information, future events, developments, changes in assumptions or otherwise.


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