1998 THIRD QUARTER AND NINE MONTH ACTIVITY
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Telecom sales up 10% in Third Quarter
Paris, October 28, 1998- Alcatel's Telecom sector registered a 10.1% gain in 1998 third quarter sales (11.6% on a comparable basis), compared with the third quarter 1997. Sales were up over 30% in the Transport/Access segment and over 20% in the Entreprise/Consumer segment. Networking sales declined by 10%, in line with trends indicated in September.
Third quarter sales in the Cables and Components sector decreased by 9.8%. A significant part of this decrease was due to a sharp decline in copper prices, which has no impact on operating income performance. At constant copper prices, sales decreased by 4.8%, reflecting the currently weak cable market.
Alcatel's total third quarter 1998 sales amounted to FF 30.7 billion.
During the first nine months of 1998, sales in the Telecom sector increased by 8.9% (8.2% on a comparable basis) and sales in the Cables and Components sector decreased by 5.4% (increased 1.4% on a comparable basis and at constant copper prices). Alcatel's total nine month sales increased by 2.4% to FF 93.2 billion, compared with FF 91.0 billion for the corresponding period in 1997. On a comparable basis and at constant copper prices, sales increased by 4.5%.
Breakdown of Sales by sector is as follows:
(in FF million)First nine months 1998
First nine months 1997
3rd quarter 1998
3rd quarter 1997
Telecom Systems Sector (1)
Networking
Transport & Access
Enterprise & Consumer
63,956
22,923
24,571
13,891
58,716
25,114
18,412
11,252
22,103
7,405
8,588
4,915
20,068
8,208
6,232
4,058
Cables & Components Sector (2) (3)
Telecom Components
Energy Cables
33,087
18,519
14,568
34,993
18,457
16,536
10,549
6,018
4,530
11,700
6,383
5,317
Others & eliminations (3)(3,817)
(2,673)
(1,939)
(805)
Total93,226
91,036
30,713
30,963
Note: Revenues from the newly created company, Alcatel Space, are included in the Transport and Access segment as of January 1, 1998. Also as of January 1, 1998, Defense activities are no longer included.
1.Networking segment: fixed and mobile switching, mobile infrastructure, network integration and design. Transport and Access segment: terrestrial and submarine transmission, wireline and wireless access systems, satellites. Enterprise & Consumer segment: PBX, corporate networking, terminals. 2.Telecom components: network and data cables, mobile components, power systems and mechanical components for telecom systems. Energy cables: energy cables and enameled wires. 3.Restated to eliminate part of the inter-sector sales between the cables and components and telecom systems sectors in the submarine activities.
Telecom Systems Sector
Third quarter 1998 sales increased by 10.1% while orders increased by 4.5% over the same period in 1997 (11.6% and 3.6% on a comparable basis). Nine months sales in the Telecom Systems sector increased by 8.9% and orders increased by 4.0% (8.2% and 4.4% on a comparable basis).
Growth for the sector during the first nine months of 1998 was especially strong in North America, in line with the Group's strategy of growing its U.S. business.
Telecom sales breakdown on a geographical basis is as follows:
First nine
months
First nine months
%
(in FF million)1998
1997
Europe36,680
35,431
3.5%
North America*8,411
6,839
23.0%
Rest of World18,865
16,446
14.7%
Total
63,956
58,716
8.9%
*DSC Communications not included
Sales in the Networking segment decreased by 9.8% in the third quarter and by 8.7 % over the first nine months of 1998, principally due to the drop in investment in public switching, in Germany and Russia, as announced in September. However, mobile infrastructure activity resumed growth at a strong pace in the third quarter, largely due to an increased level of business in China.
Sales in the Transport and Access segment increased by 37.8% in the third quarter and by 33.5% during the first nine months of 1998. The Transmission systems division once again recorded a very satisfactory performance with terrestrial systems showing strong sales growth, in both the U.S. and Europe. Submarine networks also grew at a high level. The slowdown continued in certain European wireline access markets, as anticipated, which was partially offset by the good performance of the wireless access business, where activity was particularly strong in South Africa. Aerospatiale's space business has been sucessfully integrated into Alcatel Space, which recorded a satisfactory quarter.
Sales in the Enterprise and Consumer segment increased by 21.1% in the third quarter and by 23.5% during the first nine months of 1998. This strong performance was principally due to the continued success of Alcatel's 4400 PBX throughout Europe and the strong increase in GSM handset sales.
Cables and Components Sector
Sales in the Cables and Components sector decreased by 9.8% in the third quarter and by 5.4% during the first nine months of 1998. Despite a difficult market environment, the sector maintained a stable performance for the first nine months of 1998, at constant prices. The decrease in sales during the first nine months of 1998 was due to a strong decrease in copper prices, which have declined 25% during this period. However, copper pricing does not effect the operating income performance.
Sales in the Telecom components segment decreased by 5.7% in the third quarter and remained stable during the first nine months of 1998. At constant copper prices, nine month sales increased by 2.7%. The segment has been impacted by a significant price decrease in network cables as well as lower business levels in Southeast Asia.
Sales in the Energy cables segment decreased by 14.8% in the third quarter and by 11.9 % during the first nine months of 1998. At constant copper prices, nine month sales were stable compared with 1997. The segment was affected by a significant decline in high voltage contracts due to a worldwide market slowdown.
Alcatel's Chairman and CEO, Serge Tchuruk, commented, "Third quarter 1998 Telecom sales showed an improvement in the rate of growth, as compared to the first half growth performance. Given our present trends, the objective of around 10% sales growth in the Telecom sector for the full year should be reached. Our growth strategy in the U.S. will be particularly successful in 1998. Finally, the Cables and Components sector, while operating well in a very difficult environment during the first nine months of 1998, has increased its market share and confirmed its superior competitive position."
"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements relating to the Group's expectations regarding sales for the full year 1998. Such expectations assume (I) that sales will not be lower than anticipated and (ii) that sales will not be affected by unexpected factors including a change in market conditions in 1998. Actual results could differ materially from the above as a result of these or other factors. |
