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Technology Stocks : Alcatel (ALA) and France -- Ignore unavailable to you. Want to Upgrade?

To: Steve Fancy who wrote (1175)	2/3/2000 3:45:00 PM
From: Steve Fancy	Respond to of 3891

Alcatel "Flawless" Performance Wins Investor Acclaim By DAVID GAUTHIER-VILLARS Dow Jones Newswires -- February 3, 2000 PARIS -- Alcatel SA (ALA) Thursday strengthened its image as a rising telecommunications equipment power house, delivering 1999 earnings above market expectations and maintaining its operating margin target for this year. Analysts, skeptical of the company since a shock profit warning late in 1998, said the performance was "flawless." The main beneficiary is likely to be Alcatel itself, with most analysts moving swiftly to rerate the share, raising their price target above EUR300 from EUR250. "The stock has been treated like an outcast since the company's profit warning in late 1998," said a Paris-based trader. "I think this will be over now." The results and expected analyst reratings pulled the shares to EUR247.40 by the close, ahead 12% or EUR26.60. Alcatel posted a 28% advance in 1999 full-year operating profit to EUR1.28 billion for the year ended Dec. 31, on a 8.3% jump in revenues to EUR23.02 billion. The market had been expecting operating income of around EUR1.22 billion. The group also said it's maintaining its operating margin target of 6.5% for this year, which implies a jump of around 30% in the group's operating profit in 2000, Chairman Serge Tchuruk said in a conference call. Alcatel's operating margin stood at 5.5% in the full-year 1999. The group's telecom operations are valued on the stock market at a 35% to 40% discount to those of peers such as Nortel Networks Corp. (NT) or L.M. Ericsson AB (ERICY), said an analyst at Societe Generale Asset Management. "Alcatel shares now have the potential to fill part of that gap," she said. Alcatel Chief Financial Officer Jean-Pierre Halbron said 2000 full-year revenues should grow by between 12% and 13%, underpinned by a 15% rise in revenues from the group's four telecom equipment divisions. He said operations at the company's cable unit should be stable this year. The company said research and development expenditure rose 17% for the full-year to around EUR2.1 billion. Tchuruk said this spike in R&D spending was part of the group's effort to bridge the gap with competitors in some Internet and optical technologies. Analysts said they also welcomed Alcatel's performance in fledgling markets such as asynchronous digital subscriber line equipment. Tchuruk said revenues from the sale of ADSL equipment reached $400 million in 1999, giving Alcatel a 50% world market share. He said the group will aim to sell 2.5 million ADSL lines in 2000, up from 1.6 million in 1999. ADSL technology allows telecom operators to increase the capacity of traditional copper wire networks to offer broadband services. Tchuruk declined to comment on speculation that his company is among front-runners to buy Canadian telecom network equipment maker Newbridge Networks Corp. (NN). Halbron said Alcatel could realize EUR2.5 billion in capital gains by selling stakes in Alstom SA (ALS), Societe Generale SA (F.CGF) and Vivendi SA (F.VVN). He also said Alcatel had reasonably low gearing of 19% at the end of 1999, compared with 3% at the end of 1998. Alcatel's board will propose at the next shareholders meeting to pay a net dividend of EUR2.20 a share, 10% higher than in 1998. The company will also seek shareholder approval for a five-for-one stock split. The split will simplify trading in Alcatel's American depository shares for U.S. investors, and boost the liquidity of the stock. One Alcatel share will be worth one ADS once the split is completed. -By David Gauthier-Villars, 33 (0)1 40 17 17 40 -david.gauthier-villars@dowjones.com