Alcatel - USA & Worldwide - Profile

Alcatel USA contact info:

972-477-8655

3400 West Plano Parkway

Plano, Texas 75075

www7.alcatel.com

Worldwide Headquarters contact info:

33 (1) 40.76.10.10

54, rue la Boétie, 75008

Paris, France

www.alcatel.com

Sales

$16 billion

Business Description 
We are a leading, worldwide provider of a wide variety of telecommunications equipment and services. We had net sales of $16 billion in 2003 and have approximately 60,000 employees in 130 countries. Our telecommunications equipment and services enable our customers to send or receive virtually any type of voice or data transmission. Our customers include fixed line and wireless telecommunications operators, sometimes referred to as carriers, Internet service providers, governments and businesses. Alcatel is a French société anonyme, established in 1898, originally as a publicly owned company. Alcatel’s corporate existence will continue until June 30, 2086, which date may be extended by shareholder vote. 

We organized our activities along three market segments covering the entire range of voice and data communication products and services: fixed communications, mobile communications and private communications. The organizational chart below sets forth the three business segments and their principal business activities:

Fixed Communications

General

Our Fixed Communications segment is comprised of the following divisions: fixed networks; optical networks; Internet protocol; fixed solutions; and components and sub-systems. We have a broad portfolio of products and services that are used by carriers in all facets of their network operations, from the carriers’ central office to the ultimate user. In 2003, the Fixed Communications segment had net sales of € 5,563 million, accounting for 44.5% of our net sales, excluding inter-segment sales.

Fixed Networks

We estimate that the overall fixed network market declined again in 2003 compared to the previous year, although some segments in this market experienced growth. In particular, the volume of digital subscriber lines, which are used to transmit data on copper telephone lines, increased significantly in 2003, compared to 2002. Our fixed networks division addresses two market segments: access and voice. We are the worldwide leader in access products, according to a survey conducted by the industry analyst Dell’Oro and had a 40.5% market share in the fourth quarter of 2003. Our access products consist of equipment that enables carriers to provide high speed Internet services using a large bandwidth, called “broadband,” for the transmission of data over existing copper wire telephone lines, while our voice products address the needs of carriers relating to their traditional telephone business. Using our access product, a single copper telephone line can deliver voice, video and data to up to 10,000 simultaneous users, enabling carriers to generate new revenues by providing advanced entertainment services to their customers. Our newest access product, introduced in the third quarter of 2003, permits carriers to achieve increased cost efficiency while offering broadband access on a wide scale.

We also continue to expand our offerings of broadband access products with the sale of our fiber-based products that enable the delivery of high quality voice and high definition interactive video supporting hundreds of analog and digital channels and Internet access at speeds up to 3,000 times faster than traditional dial-up modems that use copper telephone wires. During 2003 we installed these products for several utilities and municipalities in the United States.

We believe that our large installed base of digital subscriber lines, or DSL, provides us with a competitive advantage, as carriers modernize their networks by migrating to fiber-based services. In addition, using our access products and services, our systems, which serve over 35 million subscribers, can be easily and economically upgraded to deliver larger bandwidth and faster broadband services. We supply DSL products to every major carrier in North America and to the majority of carriers in Europe and Asia.

We have over 340 million voice lines deployed in over 170 countries. In order to assist carriers in modernizing these older voice networks and to provide enhanced broadband services, we introduced a new portfolio of products in the third quarter of 2003. These products provide an economical and minimally disruptive approach for carriers operating on our installed base to modernize their current network to a next generation network using Internet Protocol (IP). Using our products, carriers are offering new services both to businesses, such as voice over IP and IP virtual private networks, as well as to consumers, such as video through the Internet and on-line gaming.

Optical Networks

Our optical networks division produces equipment to transport voice and data for long distances both land-based (terrestrial) and undersea (submarine), as well as for short distances in metropolitan areas.

Terrestrial. The terrestrial optical networking market remained depressed in 2003, leading us to continue our restructuring program. In addition to a further reduction in headcount as compared to 2002, we transferred manufacturing of our low-end products (minimal features and low cost) to our manufacturing facility in China, Alcatel Shanghai Bell.

Our terrestrial products are designed for long-haul and metropolitan and core applications. With our products, carriers can manage voice and data traffic patterns based on different applications or platforms and benefit from new competitive service offerings by introducing a wide variety of data-managed services, including different service quality capabilities, variable service rates and traffic congestion management. Most importantly, these products allow our customers to offer these new services without impacting their existing investment program for their current networks.

We also offer products and services for metropolitan and business applications. Our Metro Span Edge products address carriers’ requirements for cost-effective networks to meet their growing business and data networking needs. Our products are scaleable, in that they permit our customers to easily enlarge their networks as their business and data networking needs grow. These products provide cost-effective, managed platforms that support different services and are suitable for applications in diversified network configurations. During 2003, we introduced the Light Manager, as the newest addition to our core portfolio of products. The Light Manager is designed for long haul, very long haul and ultra long haul terrestrial applications, as well as submarine applications.
We are an industry leader in technologies that manage voice and data traffic flows in the networks, called “cross connects.” Having one of industry’s leading cross connects, our products and services allow our customers to efficiently manage their private line infrastructure and increase efficiency in their metro core infrastructure.

Submarine. The submarine market continued to decline substantially in 2003, as compared to 2002. We maintained our number one leading market position, with a 64% market share, according to RHK, an industry analyst.

We are an industry leader in the development, manufacture, installation and management of undersea telecommunications cable networks. Our submarine network systems can connect continents (using regeneration due to the long distances), as well as span distances up to 400 km (using no regeneration) to connect mainland and an island, or several islands together or many points along a coast.

Network Management. Our optical networking portfolio for both terrestrial and submarine applications is supervised by a network management platform giving operators the freedom to customize and evolve their network management system and its usage according to complex and changing customer, business and operational requirements. Our comprehensive management platforms offer complete control over multi-vendor optical networks with value-added tools and services that maximize network service revenue, making the best use of existing network equipment and minimizing expenses.

In addition to our Light Manager product (described above) that has submarine applications, we also announced three additions to our metro transmission portfolio that will provide operators more options in their efforts to optimize and enhance network capabilities. These products bring additional networking flexibility to our customers. Designed for metropolitan access and private network applications, the new cost-effective products provide the ability to optimize today’s mixed traffic infrastructure, while supporting next-generation services.

Internet Protocol

Following the acquisition of TiMetra in 2003, our portfolio of data offerings is now led by two products — our multi-service, multi-protocol switch platform and a service router developed by TiMetra. Our multiservice switching platform has been designed to provide flexibility to carriers when they build and expand their networks. This platform is based on a blend of technologies, which has integrated Internet protocol and multiprotocol switching functions, thereby allowing carriers to expand their service offerings at their option and to adapt their networks to meet the growth of traffic over the Internet. A router is a device that interconnects computer networks and moves information from one network to another. Each of our products is designed to deliver high margin data services, including the full variety of network-based virtual private networks and other data services used for business applications. The service router features a new generation of processing power and many customized and scaleable applications designed to appeal to carriers and others. This service router provides high value, differentiated IP services to businesses. We believe our product provides services and applications that go well beyond what is possible with the single purpose routing products that are available today.

We have developed an Internet protocol portfolio of products to meet our customer’s varying requirements. For instance, our multiservice switch platform can interface with our service router to deliver seamless networking services regardless of technology. Seamless interfacing between the two products allows carriers to combine their newer Internet protocol or Ethernet-based networking products with their older network or base of services to offer customers a smooth service migration to these more advanced technologies. These two products allow us to support the high margin private data services that enable carriers to maximize revenue while minimizing risk.
 
Fixed Solutions

We also provide our customers with customized combinations of our products and services for the fixed network market segment. These products and services are based on a combination of applications built around our intelligent network platform and the multi-media capabilities of our product portfolio. We offer turnkey applications accompanied by a complementary portfolio of services, such as multimedia conferencing for businesses, and by applications with mass market appeal, such as video over DSL.

Mobile Communications

General

Our Mobile Communications segment provides voice and data networks and services to wireless carriers throughout the world. We provide an extensive range of products, including network hardware and software, applications hardware and software and terminals, and a wide range of services covering design and optimization of mobile networks, support to networks operations and maintenance. In 2003, our Mobile Communications segment had net sales of € 3,500 million, accounting for 28.0% of our net sales, excluding inter-segment sales.

Mobile Networks

We develop EvoliumTM mobile radio stations and core switches for all major mobile technologies — GSM/ GPRS/ EDGE and UMTS (described below). Our mobile radio products are designed to minimize total cost of ownership through a continuous re-engineering program and the use of a highly modular framework that facilitates rapid network deployment and expansion, flexible network evolution, including the easy introduction of new technologies and easier maintenance, and allows for the evolution to a third generation, or 3G, network without loss of operability.

GSM/ GPRS. Global System for Global Communications/ General Packet Radio Service, or GSM/ GPRS, remains by far the world’s dominant mobile technology. In 2003, wireless operators continued to reduce capital expenditures and focused their activities on improving their returns on investment and customer retention. As a result, the total spending for GSM/ GPRS mobile infrastructure in 2003 decreased significantly from spending in the prior year. Despite this decline, our market share for GSM/ GPRS improved for the fourth consecutive year and our market share is now approximately 13%, according to a survey conducted in 2003 by Dell’Oro, an industry analyst. In addition, we believe that we are well positioned to compete effectively in an increasingly competitive market through our focus on reducing our customers’ total cost.

EDGE. Enhanced Data for Global Evolution, or EDGE, provides a relatively simple, cost-effective development step beyond GSM/ GPRS that can be an alternative to, or complement, the implementation of UMTS (described below). Compared to GSM/ GPRS, the main benefits of EDGE are higher data transmission speeds and better geographic coverage and improved operating characteristics. EDGE does not support the full range of services provided by UMTS, such as video-telephony, and it cannot compete with UMTS data transmission speeds. However, EDGE can be faster and cheaper to deploy and has better coverage in rural area deployments. All of our Evolium Base Stations have been shipped fully EDGE-ready since early 2001, enabling EDGE to be introduced through an easy software upgrade.

UMTS. Universal Mobile Telephone Communications Systems, or UMTS or 3G, represents an important evolutionary step over GSM/ GPRS/ EDGE networks in terms of services, voice quality and data transmission speeds. Our joint venture with Fujitsu, launched in 2000, provides us with competitive and comprehensive UMTS mobile radio and core network products. During 2003, we and Fujitsu widened the scope of our Evolium SAS Joint Venture in order to increase the scope of the goods and services provided by the joint venture.

In 2003, we entered into agreements for UMTS radio stations in France and the United Kingdom and helped launch live 3G services in two French cities through an innovative turn-key partnering model which, in addition to our supplying network infrastructure and applications platforms, included our development of business partnerships with content and application suppliers and integration of the total 3G service portfolio and terminals. We also entered into additional 3G contracts with customers in Europe and Australia. We believe that UMTS will continue to gain momentum in 2004 with a number of key operators moving from pre-commercial trials to commercial deployments.
Mobile Phones

We have developed a range of handsets, marketed under the OneTouchTM name, that capitalize on two key concepts: intuitive interfaces between the user and the phone and easy access to customized value-added services, such as multi-media messaging and camera phones. In 2003, we delivered 7.6 million handsets. However, we are exploring methods of limiting our risks in this market. Under an outsourcing agreement entered into in 2001, Flextronics continues to manufacture handsets designed by us.

Mobile Solutions

Our core network products and extensive range of applications platforms enable mobile operators to deliver value-added new mobile services, which assists our customers in retaining existing customers and generating more revenues from them, as well as attracting new customers. End user needs addressed by our products include personal multimedia communication, access to information and entertainment services, and mobile commerce. We are a leader in Intelligent network platforms and services with over 110 customers worldwide and we are recognized by industry analysts for our array of innovative messaging services (for instance, instant messaging and multimedia messaging) and convergent payment applications (voice/data, pre/post-paid).

Wireless Transmission

We are a leader in the point-to-point telecommunications microwave radio market with a product portfolio that includes wireless transmission products for European telecommunications standards (ETSI) and American standard-based (ANSI) environments. We believe that we offer one of the widest arrays of network products and applications for mobile operators, and in 2003, we commenced the sale of products delivering broadband services over the air using lasers.

Private Communications

General

Our Private Communications segment develops, supplies, implements and supports products and applications for communication-intensive non-carrier markets. The primary markets this business segment focused on in 2003 were: transportation, oil/gas and utilities, banking and finance, security and government. Our Private Communications segment also provides a broad range of space-based systems that include the high speed transport of voice, data and multimedia communications. At the end of 2003, we reached an agreement to sell our battery manufacturing business and completed that sale at the beginning of 2004. In 2003, our Private Communications segment (excluding the battery manufacturing business) had total net sales of € 3,435 million, accounting for 27.5% of our net sales, excluding inter-segment sales.

Enterprise Solutions

The overall voice and data market for business enterprises was stable in 2003, compared to 2002. However, we saw a significant increase in spending in Internet protocol voice applications (voice carried on data networks). We design and build hardware and software that provide business enterprises with easy to use, open communications networking products and services. We provide Internet protocol communications products that deliver networks that are scalable, mobile and easily managed and that use software based on standard protocols so that users will not be limited if they desire to expand their networks. A key element of our product line is the Alcatel OmniPCX, a family of Internet protocol enabled private communication exchanges. Another important element of our product line is the OmniSwitch family, a portfolio of switches that provides enterprises with a programmable, multi-service infrastructure to support converged voice, data and video networks. According to a survey from the industry analyst, Dell’Oro, in the fourth quarter of 2003 we were the world-wide market leader in sales of Internet protocol private branch exchanges.

In 2003, we entered into an agreement with Hewlett Packard under which we will jointly develop and market a number of advanced, integrated information technologies and communication products specifically designed for small and medium size businesses. Alcatel and Hewlett Packard are partnering with leading telecommunications service providers throughout the world to provide small and medium size customers with modular, turn-key solutions to address their productivity needs — from personal computers and servers, to software, network access, voice, data and multimedia services.

Through our wholly-owned subsidiary, Genesys, we are a leading provider of computer telephony integration software and customer contact center products (automated answering systems). These products help businesses manage customer interactions and communications, as well as customer service operations and staffing. Our contact center products enable a business to intelligently route all incoming customer interactions in real time, including phone, email, and Web contacts. During 2003, we introduced Genesys Voice Callback, a new product that enables customers to receive a call back instead of waiting on hold for a customer service agent. In addition, we are extending our Internet protocol family of products with the introduction of our Internet protocol Contact and Network Contact Center products, which will give added support for multiple major Internet protocol private branch exchanges.

Supporting expansion into the mid-sized contact center market, our Genesys Express product provides a “ready-to-run” multimedia contact center that can be deployed in days on a single system — allowing customers to realize the benefits of contact center automation more quickly than customized, higher cost products. Genesys Express provides model environments for multi-dimensional routing, monitoring and reporting. These model environments provide configurations for common industries and contact center types to help achieve fast deployments. During 2003, we announced the launch of Genesys Express 3.0, an enhanced version of our pre-packaged customer service software offering for mid-sized contact centers.

Space Solutions

We develop a broad range of satellites and related space-based technology for the private and public sectors for use in telecommunications, navigation, optical and radar observation, meteorology, and other scientific fields. During 2003, we developed satellite telecommunication products for broadband access, wireless local loop backhaul, and GSM/ GPRS backhaul. In addition, we added satellite Internet protocol applications to our portfolio of products and services.

We also provide space-based products and services to the institutional market, including applications for telecommunications, navigation, radar and optical observation. We are also a strong contributor to the Galileo project (satellite navigation system), to the GMES project (Global Monitoring for Environment and Security) and to studies for the development of the future communication satellites. During 2003, we received orders for four telecommunications satellites and five payloads.

Transport Solutions

We provide turnkey applications for train management and control systems for inter-city and metro lines, including integrated rail communications. We have developed a new generation of train routing systems that use computer platforms to execute complex functions in order to improve the security of rail networks and at the same time to increase efficiency (more trains on the same network), thus improving passenger service.

In 2003, we continued the development of strategic new products such as radio-based train control (first commercial application expected to be in Las Vegas in 2004), overlay Urban Rail signaling for re-signaling existing metro lines (first commercial application expected to be in Paris) and urban electronic interlocking (first commercial application expected to be in New York).   In October 2003, we were awarded a contract to upgrade and maintain segments of the London underground, to re-signal Jubilee and Northern Lines with SelTrac®, our proven communications-based train control technology. This contract includes an option to re-signal also the Piccadilly Line, with design work expected to commence in 2005.

Integration and Services

We plan, design, install, operate and maintain networks tailored to customers’ objectives, regardless of their infrastructure requirements: voice or data, wireless or wireline, regional or national, or any combination of these requirements. We address both the carrier and non-carrier markets. The networks that we serve can consist entirely of our comprehensive portfolio of products and applications, or can integrate products or services produced or supplied by others. Through our network of Regional Support Centers that manage customer projects, we can deploy, manage and upgrade all aspects of our customers’ networks. The integration and services division is divided into three activities:

• Network Design and Build — defines, designs, builds and integrates equipment and application sub-systems (radio, closed-circuit TV, supervisory control and data acquisition);

• Network Operating Support — provides network support services, including technical operations and maintenance, call center operations, customer data communication, service activation and assurance; and

• Operating Support Systems — provide and integrate software applications for management of the network, including providing and billing for the service.

In 2003, we improved and expanded our service portfolio to include network outsourcing for carriers and system integration for non-carriers. These two strategic directions are intended to improve and expand the services we offer. By outsourcing their network activities to us, our customers seek to shift their focus from managing infrastructure to developing new customer services and optimizing their processes to gain efficiency.

Marketing and Competition

Marketing and Distribution

We sell all of our products, other than our private branch exchange products, through our direct sales force worldwide, except in China where our products are also marketed through our joint ventures that we have formed with Chinese companies.

Competition

We have one of the broadest product and services offerings in the telecommunications service provider market, both for the carrier and non-carrier markets. Our addressable market segment is very broad and our competitors include large companies, such as Avaya, Cisco, Ericsson, Fujitsu, Huawei, Lucent, Motorola, Nokia, Nortel and Siemens. There is also a number of smaller companies that we consider to be competitors, in one segment or another.

In light of the significant reductions in recent years in capital expenditures by telecommunications carriers and others, the level of competition has increased, causing some of our competitors to withdraw certain technologies or to exit certain geographical regions, while other competitors are emerging to take market share away from their traditional portfolio of products. In the high technology sectors, new competitors can benefit from a technological shift or rapidly gain market share.

We believe that technological advancement, quality, reliable on-time delivery, product cost, flexible manufacturing capacities, local field presence and longstanding customer relationships are the main factors that distinguish competitors of each of our segments in their respective markets.
 

Ticker

ALA

SIC Code

3661 - Telephone & Telegraph Apparatus

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