welcome [] · welcome 1 | q4 2010 earnings ... financial and operating results of alcatel-lucent...

WELCOME

1 | Q4 2010 Earnings| February 2011

All Rights ReservedAlcatel-Lucent 2011

WELCOME

INTRODUCTORY REMARKSBen Verwaayen - CEO



FEBRUARY 2011

Q4 2010 EARNINGS

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 above 5% for 2011 and continued

market share gains. Words such as "expects," "anticipates," "targets," "projects," "intends," "plans," "believes," "estimates," “aim,” “goal,”

“outlook,” momentum,” “continue,” “reach,”, “confident in,” 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 and to correctly identify and invest in the technologies that become commercially accepted, demand for our products, and

acceptance of the technologies we seek to pioneer; 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

SAFE HARBORFOR FORWARD LOOKING STATEMENTS



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 suppliers for the components =we need or a tight market for commodity components; the social, political and economic risks of

our global operations; the costs and risks associated with pension and postretirement benefit obligations; 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; control of costs and expenses;

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.

Q4 2010 HIGHLIGHTS

Strong Q4 performance2010 top-line, margin and costs guidance achieved

Increased relevance across our customer base



Great momentum coming into 2011

Solid order book, market share gains & innovation across the

product portfolio

Increased relevance across our customer base

Acceleration of mobile & fixed

Q4 2010 HIGHLIGHTS: NETWORKSSTRUCTURAL DRIVERS AT WORK

Explosion of data & video trafic



Acceleration of mobile & fixed

broadband access

Ubiquitous presence of connected devicesall around the world

Q4 2010 HIGHLIGHTS: NETWORKS GREAT MOMENTUM WITH OUR HLN STRATEGY

Outstanding acceleration

of our next generation product sales*

1100

1200

1300

1400

40%

42%

44%

46%

48%

Sales: +72% YoY+35% QoQ



*Products supporting our HLN strategy:

IP, DWDM, WT, WCDMA, LTE, IPDSLAM, FTT&OLT, IMS Core

600

700

800

900

1000

30%

32%

34%

36%

38%

40%

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 Q3 2010 Q4 2010

In M Euros In % of Networks Sales

HIGH LEVERAGE NETWORKTM (HLN)SUMMARY OF KEY WINS - Q4’10

Converged service

control

Converged RAN

IMS CoreMobile Backhaul

LTE

2G/3G

6 new/extension contracts

70 references to dateQatar9 contracts

60+ trials to date

9 new/extension contracts

E2E Wireless agreement

10+ new/extension contracts

Small Cells

17 contracts

20+ trials to date

Qatar



Converged edgeConverged

wireline access

Converged

metro and

aggregation

Converged

backbone

Submarine Networking

4 major wins

100G IP and WDM

30+ references to date

Qatar

Broadband Access (xDSL/xPON)

15+ new/extension contracts

Vectoring, Phantom mode trial

Q4 2010 HIGHLIGHTS: IP DIVISIONSALES AT RECORD LEVEL

19%

49%

30,0%

40,0%

50,0%

60,0%

300

400

500

600

� All-IP network transformation underway in all geographies

� Tremendous sales growth withannualized sales of € 2Bn at year

€%



-5%

6%

-10,0%

0,0%

10,0%

20,0%

0

100

200

300

Q1'10 Q2'10 Q3'10 Q4'10

IP revenue (€) YoY change (cst curr.)

annualized sales of € 2Bn at yearend

� Leadership in IP/MPLS mobile backhaul; Sprint & America Movilannounced in Q4

Q4 2010 HIGHLIGHTS: OPTICSRECOVERY DRIVEN BY TERRESTRIAL

� Network convergence & metroarea capacity requirements, first roll-out of 100G systems

� Double-digit growth in TerrestrialOptics with WDM up by 50%

€%

1%

-5,0%

0,0%

5,0%

500

600

700

800

900



Optics with WDM up by 50%

� Leading the 100G era in IP/Optical with 30+ references

� Sustained contracting activity in submarine in Q4

-15%

-18%

-14%

-20,0%

-15,0%

-10,0%

0

100

200

300

400

500

Q1'10 Q2'10 Q3'10 Q4'10

Optics revenue (€) YoY change (cst curr.)

� Subscribers & data traffic growthsupported by 2G & 3G

� Double-digit growth in all technologies

Q4 2010 HIGHLIGHTS: WIRELESSSTRONG MOMENTUM ACROSS THE BOARD

14%

34%

15,0%

20,0%

25,0%

30,0%

35,0%

40,0%

800

1 000

1 200

1 400

€%



technologies

� First sizeable LTE revenues

� 15+ new or wireless extension contracts in Q4

-8%

0%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

0

200

400

600

Q1'10 Q2'10 Q3'10 Q4'10

Wireless revenue (€) YoY change (cst curr.)

� Very strong growth in PON technology

� Legacy business decline offsettingbroadband sales growth

Q4 2010 HIGHLIGHTS: WIRELINEPREPARING FOR THE NEXT WAVE OF BROADBAND ROLL-OUT

-9%

15%

0,0%

5,0%

10,0%

15,0%

20,0%

300

400

500

600

€%



� Continuing fiber & copperinnovation:

New market trials for bonding, vectoring& phantom mode

Industry-first commercial 10G PON solution

-23%

-18%

-9%

-25,0%

-20,0%

-15,0%

-10,0%

-5,0%

0

100

200

300

Q1'10 Q2'10 Q3'10 Q4'10

Wireline revenue (€) YoY change (cst curr.)

HIGH LEVERAGE NETWORKTM (HLN)DRIVING INVESTMENTS ON KEY PROGRAMS ACROSS THE PORTFOLIO

Converged service

control

Converged

RAN

M P R / S A R

integration

CRANLTE

Small CellsSelf-X

IMSCore

WirelessPacketCore

ConvergedIP/Optical

ConvergedNetworkGateway

LightRadio

PolicyManagement



Converged

edge

Converged

wireline access

Converged

metro and

aggregation

Converged

backbone

Converged service-aware

network management

IP/Opticalbackbone

10G

xPON

Video andcontentdelivery

WDM40G/100Gcoherent

OTN/WDM

CommonManagement

Bonding,

Vectoring,

Phantom

xDSL/xPON familywith

CommonModules

MAPPING THE FUTURE OF MOBILE TECHNOLOGY

TODAY TOMORROW



InclusiveGreen Invisible

Q4 2010 HIGHLIGHTS: APPLICATIONSREBALANCED PORTFOLIO PAYING OFF

� Next generation portfolio drivinggrowth for App. Networks:

Digital Media distribution

Remote customer management

� New Application Enablement

€%

-0,1%

-0,8%

1,4%

-0,6%

3,5%

-3,5%

1,3%

-8,0%

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

400

600

800

1 000

1 200



� New Application Enablementpartnership in secured mobile payment

� In Enterprise, strong performance in data networking & growth atGenesys offsetting decline in traditional voice business

-12,9%

-14,0%

-12,0%

-10,0%

-8,0%

0

200

400

Q1'10 Q2'10 Q3'10 Q4'10

Applications revenue (€)

YoY change Enterprise Applications (cst curr.)

YoY change Networks Applications (cst curr.)

� Managed Services maintained a double digit rate of growth

� Maintenance activity remainedmuted

Q4 2010 HIGHLIGHTS: SERVICESCONTINUOUS IMPROVEMENT

2%

3%

-1,0%

0,0%

1,0%

2,0%

3,0%

4,0%

600

800

1 000

1 200

€%



� Sharp acceleration in Network & System Integration

� Strategic Industries: a key growthcontributor in Services

-4,5%-5,0%

-6,0%

-5,0%

-4,0%

-3,0%

-2,0%

-1,0%

0

200

400

600

Q1'10 Q2'10 Q3'10 Q4'10

Services revenue (€) YoY change (cst curr.)

TransportationTransportation Energy Energy Public Sector

HighwaysRail Oil & GasPower Utilities

Smart GridPublic SafetyDefense e-gov

STRATEGIC INDUSTRIES: A KEY DRIVER FOR THE FUTURE

Airport



Operationalefficiency

Always-onsecurity

Green & Eco-sustainability

High Leverage Network™

Application Enablement Service Integration capabilities

Q4 2010 HIGHLIGHTSBY GEOGRAPHIES: GROWTH ACROSS ALL REGIONS

+8% yoy growth in Western Europe Acceleration in APAC to

+21% yoy growthChina growing above 50%



+45% yoy growthin North AmericaStrong growth across

all segments

Resumed growthin Rest Of World at +19% yoyAbove 50% growth in Latam partly compensated

by slight decline in Middle East/Africa

Q4 2010 OPERATIONAL HIGHLIGHTS

Gross Margin supported by our Next. Gen product sales & geographic mix

Structural improvement of the cost structure

€ 300m of fixed costs reduction in 2010



€ 300m of fixed costs reduction in 2010

Break-even point lowered by € 1Bn

Strengthened balance sheetPositive net cash position end of Q4’10

debt maturity extended

2011 OUTLOOK

Alcatel-Lucent feels confident to grow fasterthan its addressable market



For 2011 Alcatel-Lucent aims to reach an adjusted operating margin above 5%

Q4 2010 RESULTSPaul Tufano - CFO



Q4 ’10 ADJUSTED P&L

In Euro Million Q4 '10 YoY QoQ FY'10 FY '09 YoY

Revenues 4,862 22.6% 19.3% 15,996 15,157 5.5%

Gross profit 1,760 21.0% 27.8% 5,572 5,112 9.0%

Gross margin 36.2% -0.5 pt 2.4 pt 34.8% 33.7% 1.1 pt

R&D Gross (658) 22.8% 3.9% (2,491) (2,376) 4.8%

in % of revenues 13.5% 0.0 pt -2.0 pt 15.6% 15.7% -0.1 pt

Capitalization / Other 1 (12) 4



Capitalization / Other 1 (12) 4

R&D Net (657) 23.0% 4.5% (2,503) (2,372) 5.5%in % of revenues 13.5% 0.1 pt -1.9 pt 15.6% 15.6% 0.0 pt

SG&A (709) 9.2% 3.2% (2,781) (2,796) -0.5%in % of revenues 14.6% -1.8 pt -2.3 pt 17.4% 18.4% -1.0 pt

Total OPEX (1,366) 15.5% 3.8% (5,284) (5,168) 2.2%in % of revenues 28.1% -1.7 pt -4.2 pt 33.0% 34.1% -1.1 pt

Op. income (loss) 394 45.4% ca 6x 288 (56) nm

Operating margin 8.1 % 1.3 % 6.6 pt 1.8 % -0.4 % 2.2 pt

Q4 & FY’10 REVENUE BREAKDOWN BY OPERATING SEGMENTS

In Euro Million

Revenues

Q4 '10 Q4 '09YoY

Current

YoY

Constant *FY '10 FY '09 YoY

YoY

Constant *

Networks 2,952 2,242 31.7% 23.1% 9,643 9,076 6.2% 1.5%

IP 508 320 58.8% 48.8% 1,464 1,177 24.4% 18.7%

Optics 815 763 6.8% 0.7% 2,655 2,854 -7.0% -11.0%

Wireless 1,156 800 44.5% 34.4% 4,064 3,547 14.6% 9.3%

Wireline 488 398 22.6% 14.8% 1,548 1,619 -4.4% -8.5%



Wireline 488 398 22.6% 14.8% 1,548 1,619 -4.4% -8.5%

Other & eliminations (15) (39) nm nm (88) (121) nm nm

Applications 575 535 7.5% 1.7% 1,979 1,914 3.4% 0.2%

Enterprise Applications 330 317 4.1% -0.6% 1,205 1,170 3.0% 0.4%

Networks Applications 251 232 8.2% 1.3% 794 777 2.2% -2.2%

Other & eliminations (6) (14) nm nm (20) (33) nm nm

Services 1,140 1,030 10.7% 3.4% 3,743 3,569 4.9% -0.5%

Other & Eliminations 195 160 nm nm 631 598 nm nm

Total 4,862 3,967 22.6% 15.1% 15,996 15,157 5.5% 1.3%

Q4 & FY’10 OPERATING INCOMEBREAKDOWN BY OPERATING SEGMENTS

In Euro Million

Adj. operating income (loss)

Q4 '10 Q4 '09YoY

CurrentFY '10 FY '09

YoY

Current

Networks 229 19 210 187 (297) 484

in % of revenues 7.8% 0.8% 7.0 pt 1.9% -3.3% 5.2 pt

Applications 47 80 (33) 18 (5) 23

in % of revenues 8.2% 15.0% -6.8 pt 0.9% -0.3% 1.2 pt



in % of revenues 8.2% 15.0% -6.8 pt 0.9% -0.3% 1.2 pt

Services 88 141 (53) 95 203 (108)

in % of revenues 7.7% 13.7% -6.0 pt 2.5% 5.7% -3.2 pt

Other & Eliminations 30 31 (1) (12) 43 (55)

Total 394 271 123 288 (56) 344

in % of revenues 8.1% 6.8% 1.3 pt 1.8% -0.4% 2.2 pt

Q4 ’10 REVENUES GEOGRAPHICAL BREAKDOWN

● Q4 ’10 Total Revenue: €4,862M ● FY’10 Total Revenue: €15,996M



North America 33 %

Asia Pacific 9 %

Europe 8 %

RoW 12 %

Q4’10 - YoY Revenue ∆ (in local currencies)

North America 17 %

Asia Pacific -9 %

Europe -2 %

RoW -7 %

FY’10 - YoY Revenue ∆ (in local currencies)

BALANCE SHEET HIGHLIGHTS

In Euro MillionDec. 31, '10 sept. 30, '10 Dec. 31, '09

Goodwill 4,370 4,311 4,168

Other intangible assets 2,056 2,096 2,214

Other non-current assets (excl. market. sec & pensions) 2,901 2,762 2,790

Operating working capital 906 890 949

Net assets/(liabilities) held for sale 3 148 50



Net cash / (debt) 377 (190) 886

Shareholders’ equity - Group share 3,545 2,377 3,740

Minority interests 660 631 569

Net Pensions & OPEB 2,344 3,211 2,643

Non current liabilities (excl.debt & pensions) 1,385 1,373 1,266

Reserves 1,858 1,969 2,122

Other current liabilities/(assets) net 821 456 717

OPERATING WORKING CAPITAL

In Euro Million Dec 31, 2010 Sept 30, 2010 Dec 31, 2009

Net inventories* 2,295 2,567 1,902

Net receivables* 3,664 3,323 3,519

Payables & progress payments (5,053) (5,000) (4,472)

OWC as reported ** 906 890 949



As % of revenues (12 months) 5.7% 5.9% 6.3%

Trailing 4 quarter revenues 15,996 15,101 15,157

OWC before sales of receivables 1,682 1,524 1,561

As % of revenues (12 months) 10.5% 10.1% 10.3%

* Including amounts related to construction contracts

** Reserves on construction contracts have been reclassified to Provisions in the statement of financial position

CASH FLOW STATEMENT

Q4 '10 Q3 '10 Q4 '09

Net (debt)/cash at beginning of period (190) 107 592

Adjusted operating income 394 61 271

Depreciation & Amort; OP non cash; other 81 275 136

Op. Cash Flow before change in WCR* 475 336 407

Change in operating WCR 2 (82) 100

Change in other WCR 225 (61) 128

Operating Cash Flow** 702 193 635

Interest (12) (92) (17)

Taxes 12 (61) (27)



Taxes 12 (61) (27)

Cash contribution to pension & OPEB (62) (56) (67)

Restructuring cash outlays (91) (73) (157)

Cash flow from operating activities 549 (89) 367

Capital expenditures (incl. R&D cap.) (230) (184) (194)

Free Cash Flow 319 (273) 173

Discontinued, Cash from financing & Forex 248 (24) 121

Change in net(debt)/cash position 567 (297) 294

Net (debt)/cash at end of period 377 (190) 886

* 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

FUNDED STATUS OF ALCATEL-LUCENT PENSIONS & OPEB (IFRS)

In Euro Million

Pensions OPEB Pensions OPEB Pensions OPEB

Fair value of plan assets 27,002 536 27,017 394 24,365 560

(In USD Million) 36,080 716 36,873 538 34,920 803

Benefit obligations (24,720) (3,334) (25,505) (3,315) (22,846) (3,064)

(In USD Million) (33,031) (4,455) (34,809) (4,524) (32,743) (4,391)

2,282 (2,798) 1,512 (2,921) 1,519 (2,504)

Dec 31, '09Dec 31, '10 Sept 30, '10



2,282 (2,798) 1,512 (2,921) 1,519 (2,504)

Funded Status

(In USD Million)

Asset ceiling (1,828) - (1,802) - (1,658) -

Net balance sheet

(1,412)

(2,643)

(985)

(3,211)

(689)

(2,344)

(1,409)

(1,923)

(516)

CONTINUOUS ACTIONS ON THE COSTS BASE*

(in €)

-550m-300m

-300/-400m

> 7bn



Around € 1.2Bn of fixed costs reduction expected in 3 yearsAround € 1.2Bn of fixed costs reduction expected in 3 years

2008 2009 2010 2011

* Defined as the sum of R&D, SG&A and Fixed Operation Costs, before FX and var. comp.

2011: PATH TO >5% Adj. Op. MARGIN

GROSSMARGIN

Product mix & Volume growth

Project management & manufacturing

Maintain focus on Next. Gen Areas

€ -300mR&D

Fix.

Var.

Purchases & Logistics



Next. Gen Areas

2010Costs base

Administrative expenses

IS/IT - Real estate

Organizational

complexity

€ -300mto

€ -400m

R&D

SG&A

Alcatel-Lucent feels confident to grow fasterthan its addressable market

2011 OUTLOOK



For 2011 Alcatel-Lucent aims to reach an adjusted operating margin above 5%

QUESTIONS & ANSWERS



ADDITIONAL INFORMATION



Q4’10 REPORTED AND ADJUSTED RESULTS

Q4 '10

Reported

PPA

impacts

Q4 '10

Adjusted

FY '10

Reported PPA impacts

FY '10

Adjusted

In Euro Million

Revenues 4,862 0 4,862 15,996 0 15,996

Gross profit 1,759 1 1,760 5,571 1 5,572

SG&A (742) 33 (709) (2,907) 126 (2,781)

Net R&D (696) 39 (657) (2,662) 159 (2,503)

Operating income (loss) 321 73 394 2 286 288

Restructuring (60) 0 (60) (375) 0 (375)

Post-retirement benefit plan amendment 0 0 0 30 0 30



Litigations (22) 0 (22) (28) 0 (28)

Gain/loss on disposals 65 0 65 62 0 62

Financial income (loss) 54 0 54 52 0 52

Share in net income of equity affiliates 2 0 2 14 0 14

Income Tax (9) (28) (37) (37) (111) (148)

Income from discontinued operations 1 0 1 (12) 0 (12)

Net Income 352 45 397 (292) 175 (117)

Minority Interest (12) (12) (42) (42)

Net Income (Group share) 340 45 385 (334) 175 (159)

Diluted EPS, in € 0.13 0.14 (0.15) (0.07)

# shares (Million) 2,956.6 2,956.6 2,259.9 2,259.9

RESTATEMENT OF 2009 BREAKDOWN BY OPERATING SEGMENTS

In Euro Million

Revenues Q1 '10 Q2 '10 Q3 '10 Q4 '10 FY '10 Q1 '09 Q2 '09 Q3 '09 Q4 '09 FY 2009

Networks 1,928 2,304 2,459 2,952 9,643 2,219 2,384 2,231 2,242 9,076

IP 272 318 366 508 1,464 288 286 283 320 1,177

Optics 567 622 651 815 2,655 657 728 706 763 2,854

Wireless 819 1,021 1,068 1,156 4,064 915 972 860 800 3,547

Wireline 298 366 396 488 1,548 393 424 404 398 1,619

Other & eliminations (28) (23) (22) (15) (88) (34) (26) (22) (39) (121)

Applications 416 489 499 575 1,979 444 462 473 535 1,914

Enterprise Applications 271 305 299 330 1,205 276 298 279 317 1,170

Networks Applications 149 188 206 251 794 173 173 199 232 777

Other & eliminations (4) (4) (6) (6) (20) (5) (9) (5) (14) (33)

Services 772 883 948 1,140 3,743 797 873 869 1,030 3,569

Other & Eliminations 131 137 168 195 631 138 186 114 160 598



Other & Eliminations 131 137 168 195 631 138 186 114 160 598

Total 3,247 3,813 4,074 4,862 15,996 3,598 3,905 3,687 3,967 15,157

Adj. operating income (loss) Q1 '10 Q2 '10 Q3 '10 Q4 '10 FY '10 Q1 '09 Q2 '09 Q3 '09 Q4 '09 FY 2009

Networks (128) 55 31 229 187 (154) (136) (26) 19 (297)

in % of revenues -6.6% 2.4% 1.3% 7.8% 1.9% -6.9% -5.7% -1.2% 0.8% -3.3%

Applications (27) (17) 15 47 18 (55) (30) 0 80 (5)

in % of revenues -6.5% -3.5% 3.0% 8.2% 0.9% -12.4% -6.5% 0.0% 15.0% -0.3%

Services (40) 19 28 88 95 (63) 87 38 141 203

in % of revenues -5.2% 2.2% 3.0% 7.7% 2.5% -7.9% 10.0% 4.4% 13.7% 5.7%

Other & Eliminations 0 (29) (13) 30 (12) 18 17 (23) 31 43

Total (195) 28 61 394 288 (254) (62) (11) 271 (56)

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