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Alcatel Optronics: Second Quarter Sales up 75%

Source: Alcatel Optronics

Visibility Continues to Weaken Going Forward

July 26, 2001

Paris, France. Alcatel Optronics, a leading supplier of optoelectronic components, today reported second quarter and first half results. Sales for the second quarter increased by 75% to Euro 149.7 million over the same period last year while income from operations declined by 7% to Euro 19.6 million. On a sequential basis sales for the second quarter declined by 4%.

"Second quarter sales growth was in line with our expectations, which has been a good achievement given current market conditions, with margins suffering from a difficult operating environment," said Jean-Christophe Giroux, CEO of Alcatel Optronics.

"We continue to be optimistic about the long term. However, we recognize that today our customers lack of visibility and the steep downturn of the market make it virtually impossible to accurately provide guidance going forward, at least for the months to come. In response to the difficulties in today s markets, we have implemented an action plan across the board aimed at increasing our flexibility and reactivity in this changing environment. We believe these actions today are the key to meeting the challenges of the future and pursuing our growth strategy."

Second Quarter (unaudited)

Sales for second quarter 2001 increased by 75.3 % to Euro 149.7 million compared with Euro 85.4 million in second quarter 2000. Gross profit amounted to Euro 44.8 million, representing a gross margin of 29.9% compared with 39.3% in second quarter 2000. This decrease is due in part to a higher depreciation charge related to capex spending for capacity expansion. SG&A amounted to Euro 10.1 million or 6.7% of sales. R&D amounted to Euro 15.1 million or 10.1% of sales. Income from operations was registered at Euro 19.6 million representing an operating margin of 13.1%. Net income amounted to Euro 11.8 million compared with Euro 14.9 million in second quarter 2000. Net income (pre-goodwill) amounted to Euro 13.5 million.

First Half (unaudited)

Sales for first half 2001 increased by 89.4 % to Euro 305.5 million compared with Euro 161.3 million in first half 2000. Gross profit amounted to Euro 98.7 million, representing a gross margin of 32.3% compared with 38.6% in first half 2000. This decrease is due in part to a higher depreciation charge related to capex spending for capacity expansion. SG&A amounted to Euro 19.8 million or 6.5% of sales. R&D amounted to Euro 28.9 million or 9.5% of sales. Income from operations was registered at Euro 50 million representing an operating margin of 16.4%. Net income amounted to Euro 30.2 million compared with Euro 25.2 million in first half 2000. Net income (pre-goodwill) amounted to Euro 33.6 million.

Key Figures Second Quarter First Half (in Euro millions) 2001 2000 2001 2000 Net Sales 149.7 85.4 305.5 161.3 Gross Profit 44.8 33.6 98.7 62.3 Income from Operations 19.6 21.1 50.0 37.9 Net Income 11.8 14.9 30.2 25.2 Net Income (pre-goodwill) 13.5 14.9 33.6 25.2 EPS for Class O shares under GAAP is presented in Alcatel s Financial Statements. Notional EPS calculated below is disclosed for convenience purpose. 2001 Notional EPS (Euro)* 0.14 Notional EPS ($ADS)* 0.12 Number of Notional Class O Shares 94.9 Outstanding

*This Notional EPS is calculated as earnings before amortization of goodwill of the Alcatel Optronics division divided by the notional number of Alcatel Class O shares (94,875,000). E/ADS has been calculated using the New York noon Euro/dollar buying rate of June 29, 2001 of $0.8474.

About Alcatel Optronics Alcatel Optronics designs, manufactures and sells high performance optical components, modules and integrated sub-systems for use in terrestrial and submarine optical telecommunications networks. Operating state-of-the-art manufacturing plants in North America and Europe, Alcatel Optronics is a leading supplier of DWDM lasers, photodetectors, optical amplifiers, high-speed interface modules and key passive devices such as arrayed waveguide multiplexers and Fiber Bragg Grating filters. It also has experience in integrating active and passive components and modules into sub-systems. The Optronics Division is part of Alcatel s Optics Group which comprises Alcatel s world-leading activities in optical networking, including submarine and terrestrial transmission systems, fiber optics and optical components. For more information, visit Alcatel Optronics on the Internet: www.alcatel.com/optronics

About Alcatel Alcatel builds next generation networks, delivering integrated end-to-end voice and data networking solutions to established and new carriers, as well as enterprises and consumers worldwide. With sales of EURO 31 billion in 2000 and 110,000 employees, Alcatel operates in more than 130 countries. For more information, visit Alcatel on the Internet: http://www.alcatel.com

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements relating to (i) Alcatel Optronics guidance regarding its performance in future periods, including, with respect to sales and profitability for 2001 (ii) Alcatel Optronics ability to remain competitive in the industry in which it operates and its future growth and (iii) the benefits of its cost reductions. These forward looking statements are based on current expectations, forecasts and assumptions that involve risks and uncertainties that could cause actual outcomes and results to differ materially from those projected. These expectations assume that (i) current market trends in sales will stabilize and operating profits will improve, (ii) the Company will benefit from growth in the telecommunications market, (iii) the Company s sales volume will increase in several product markets, and (iv) customer spending patterns will not change. Unfavorable changes in the above or other factors listed under "Risk Factors" from time to time in Alcatel s SEC reports, could materially affect Alcatel Optronics.

Alcatel Optronics Press Contact (France)

Klaus Wustrack / Alcatel HQ
Tel : +33 (0) 1 40 76 11 56
klaus.wustrack@alcatel.fr


Guy Mesquida / Alcatel Optronics
Tel : +33 (0) 1 64 49 49 03
guy.mesquida@alcatel.fr

Investor Relations and U.S./UK Press Contact

Charlotte Laurent-Ottomane
Tel: +1. 703 679 6710/U.S.
Tel: +33 1 40 76 13 30/France
charlotte.laurent-ottomane@alcatel.fr


E-mail: charlotte.laurent-ottomane@alcatel.fr
Web site: http://www.alcatel.com
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