FIRST QUARTER 2000 RESULTS: RECORD GROWTH TELECOM SALES UP BY 47% WITH STRONG IMPROVEMENT IN OPERATING PROFIT OUTLOOK RAISED FOR FULL YEAR TELECOM SALES GROWTH TO 30%
Paris, May 4, 2000 - Alcatel (Paris: CGEP.PA; NYSE: ALA) today reported a 42% increase in sales to EUR 6,124 million for first quarter 2000, compared with EUR 4,319 million in the first quarter 1999, with Telecom sales growing by 47%. Income from operations improved significantly to a profit of EUR 113 million, compared with a loss of EUR 154 million in the corresponding period. Net income amounted to EUR 258 million, representing a diluted EPS of EUR 1.31 ($0.25 per ADS).
Serge Tchuruk, CEO, said, "Alcatel has posted record growth during the first quarter, with a strong performance across the board. We have significantly improved our profitability in this seasonally low quarter while maintaining a strong level of R&D investment to support new products to be rolled out in the next few quarters.
With the trends we are seeing in our business and our strong order book, we believe that Alcatel can clearly go beyond the 2000 market growth, now estimated to be at 20%. We expect that our top line growth will be around 30% for the four Telecom segments, as opposed to mid-teens as was conveyed at the beginning of the year. We also believe that for the year 2000, we should meet our recurring target to grow Alcatel's operating income twice as fast as sales.
We are optimistic about Alcatel's future. The first quarter has confirmed Alcatel's strong performance in fast Internet access solutions, where we are clearly the world leader. In wireline access we delivered over one million ADSL lines since the beginning of the year. Coupled with our growing success in next generation access nodes, Alcatel saw its sales grow by 80% in the U.S. In broadband wireless access, our LMDS solutions gained wide acceptance, opening the potential of a world market share similar to that of our ADSL. In mobile Internet access, our joint company will capitalize on Fujitsu's strong 3rd generation UMTS position with Japan's DoCoMo and on Alcatel's advanced product offering in GPRS and EDGE. Our business in optical networking has progressed considerably with Alcatel winning major contracts in DWDM backbones, optical cross connects and submarine networks. We now see our optical business approaching the EUR 7 billion mark at year-end, rewarding the substantial R&D investments which we continue to make in this fast growth area.
With the projected IPO of our cable activity, Alcatel will become a pure telecom player highly focused on fast growth data centric business. Beyond access and optics, we are encouraged by the excellent market prospects for our next generation network offering, which will include the Newbridge portfolio when the transaction is complete. Also, we are confident that we have made the right choice in our enterprise focus on converged voice / data solutions and e-business."
First Quarter 2000 results (Unaudited)
First quarter net sales amounted to EUR 6,124 million, an increase of 41.8% over first quarter 99, with strong growth in all segments. Europe accounted for 57.3% of net sales, the U.S., Alcatel's largest single market, 19.5%, Asia 6.9%, and ROW 16.3%.
Gross margin improved by over 2 points compared with first quarter 99. Selling, general and administrative ("SG&A") expenses in the first quarter 2000 decreased to 14.8% of revenues from 17.1% in first quarter 1999. R&D spending increased by EUR 160 million to EUR 648 million, representing 10.6% of sales, with continued focus in optical networking and data networking products for service providers.
Income from operations increased to a profit of EUR 113 million, compared with a loss of EUR 154 million in the 1999 corresponding period.
Income before taxes and amortization of goodwill amounted to EUR 460 million and included a capital gain of EUR 435 million, resulting from the disposal of financial assets. Net income amounted to EUR 258 million or a diluted EPS of EUR 1.31 ($0.25 per ADS) based on 197.03 million shares, compared with a loss of EUR 18 million in first quarter 99. Gearing was 15.3%, down from the 99 year end level of 19.5%
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