Alcatel-lucent Temporis 700
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User reviews and opinions
|karlotto||4:56pm on Sunday, September 12th, 2010|
|EXCELLENT BLU RAY PICTURE ! IT WAS LIKE WATCHING IT FOR THE FIRST TIME ; GREAT PRICE NEWEGG NONE Nice packaging by Iogear utilizing all recyclable material. I have quite a few Iogear products, and they all are excellent.|
|poirot||1:51pm on Monday, August 9th, 2010|
|Call me herectic, but I think the Koss Portapro is generally overrated. I had read so many reviews praising the PortaPro that I decided to get them.|
|milktoast||3:22pm on Sunday, July 11th, 2010|
|Happy with purchase. Since the headphones collapse, they are very portable. They are also very sturdy. I already had a pair of Sennheiser px-100 headphones.|
|Sivar||8:21pm on Saturday, June 19th, 2010|
|The headphones are value for your money. Only $30 for a pair of headphones that sounds better than a pair of Beats by dr. dre Studios. These are outstanding quality for $30 headphones. Rich and full sound. However I have trouble wearing them for extended periods of time. I love this headphones for its easy not styli... Easy to use, very comfortable.|
|ookid||5:26am on Wednesday, May 5th, 2010|
|I love the Koss headphones, i always have liked Koss even better than Sony or any other maker of headphones they make my music sound tremendous.|
|mystiprisme||10:38am on Friday, April 30th, 2010|
|Once you select the appropriate size buds out of the 3 pairs it comes with, these are great because they plug out ambient noise. PORTA PRO, HAS THE Comfortable","Compact","Durable","Good Bass","Good Value","Great Sound","Lightweight","Stylish Ear Plugs|
|salomon||4:34pm on Tuesday, April 13th, 2010|
|Great for the price I purchased these because I lost my Bose in-ear headphones and did not want to spend $100 on an expensive pair again. First step into Audiophile-land. Simply put, these headphones are very good. The price makes them even better. I find that the bass.|
Comments posted on www.ps2netdrivers.net are solely the views and opinions of the people posting them and do not necessarily reflect the views or opinions of us.
Rapid changes to existing regulations or technical standards or the implementation of new ones for products and services not previously regulated could be disruptive, time-consuming and costly to us.
We develop many of our products and services based on existing regulations and technical standards, our interpretation of unfinished technical standards or the lack of such regulations and standards. Changes to existing regulations and technical standards, or the implementation of new regulations and technical standards relating to products and services not previously regulated, could adversely affect our development efforts by increasing compliance costs and causing delay. Demand for those products and services could also decline.
We have significant international operations and a significant amount of our revenues are made in emerging markets and regions.
In addition to the currency risks described elsewhere in this section, our international operations are subject to a variety of risks arising out of the economy, the political outlook and the language and cultural barriers in countries where we have operations or do business. We expect to continue to focus on expanding business in emerging markets in Asia, Africa and Latin America. In many of these emerging markets, we may be faced with several risks that are more significant than in other countries. These risks include economies that may be dependent on only a few products and are therefore subject to significant fluctuations, weak legal systems which may affect our ability to enforce contractual rights, possible exchange controls, unstable governments, privatization actions or other government actions affecting the flow of goods and currency. We are required to move products from one country to another and provide services in one country from a base in another. Accordingly, we are vulnerable to abrupt changes in customs and tax regimes that may have significant negative impacts on our financial condition and operating results.
We are involved in significant joint ventures and are exposed to problems inherent to companies under joint management.
We are involved in significant joint venture companies. The related joint venture agreements may require unanimous consent or the affirmative vote of a qualified majority of the shareholders to take certain actions, thereby possibly slowing down the decision-making process. Our largest joint venture, Alcatel Shanghai Bell, has this type of requirement. We own 50% plus one share of Alcatel Shanghai Bell, the remainder being owned by the Chinese government. On February 12, 2008 we also announced a memorandum of understanding with NEC to create a joint venture that will focus on the development of Long Term Evolution (LTE) wireless broadband access product offerings. This joint venture may also be subject to similar governance provisions.
We are subject to environmental, health and safety laws that restrict our operations.
Our operations are subject to a wide range of environmental, health and safety laws, including laws relating to the use, disposal and clean up of, and human exposure to, hazardous substances. In the United States, these laws often require parties to fund remedial action regardless of fault. Although we believe our aggregate reserves are adequate to cover our environmental liabilities, factors such as the discovery of additional contaminants, the extent of required remediation and the imposition of additional cleanup obligations could cause our capital expenditures and other expenses relating to remediation activities to exceed the amount reflected in our environmental reserves and adversely affect our results of operations and cash flows. Compliance with existing or future environmental, health and safety laws could subject us to future liabilities, cause the suspension of production, restrict our ability to utilize facilities or require us to acquire costly pollution control equipment or incur other significant expenses.
3.4 RISKS RELATING TO THE MARKET
The telecommunications industry fluctuates and is affected by many factors, including the economic environment, decisions by service providers regarding their deployment of technology and their timing of purchases, as well as demand and spending for communications services by businesses and consumers.
Growth in the global telecommunications industry slowed in 2007, largely reflecting slightly negative growth in the global market for carrier telecommunications equipment and related applications and services at actual exchange rates. Although we believe the demand for telecommunications services will continue to grow in 2008, the equipment side of the industry is more likely to see a continuation of 2007s slightly negative growth, at current exchange rates. Moreover, the rate of growth could vary geographically and across different technologies, and is subject to substantial fluctuations. The specific industry segments in which we participate may not experience the growth of other segments. In that case, the results of our operations may be adversely affected. If capital investment by service providers grows at a slower pace than anticipated, our revenues and profitability may be adversely affected. The level of demand by service providers can change quickly and can vary over short periods of time, including from month to month. As a result of the uncertainty and variations in the telecommunications industry, accurately forecasting revenues, results and cash flow remains difficult. In addition, our sales volume and product mix will affect our gross margin. Therefore, if reduced demand for our products results in lower than expected sales volume, or if we have an unfavorable product mix, we may not achieve the expected gross margin rate, resulting in lower than expected profitability. These factors may fluctuate from quarter to quarter.
Thales. On December 1, 2006, we signed an agreement with Thales for the transfer of our interests in two joint ventures in the space sector created with Finmeccanica and of our railway signaling business and our integration and services activities for mission-critical systems not dedicated to operators or suppliers of telecommunications services (see Highlights of transactions during 2007 Dispositions above).
Buy-out of Fujitsu joint venture. In August 2006, we acquired Fujitsus share in Evolium 3G, our wireless infrastructure joint venture with Fujitsu.
Highlights of Transactions during 2005
Acquisition of Native Networks. On March 17, 2005, we completed the acquisition of Native Networks, Inc., a provider of optical Ethernet goods and services, for U.S.$ 55 million in cash.
Sale of shareholding in Nexans. On March 16, 2005, we sold our shareholding in Nexans, representing 15.1% of Nexans share capital, through a private placement. Sale of electrical power systems business. On January 26, 2005, we completed the sale of our electrical power business to Ripplewood, a U.S. private equity firm.
Amendment of credit facility. On March 15, 2005, we amended our existing syndicated revolving 1.3 billion credit facility by extending the maturity date from June 2007 to June 2009, with a possible extension until 2011, eliminating one of the two financial covenants, reducing the cost of the facility and reducing the overall amount to 1.0 billion. Merger of space activities. On July 1, 2005, we completed the merger of our space activities with those of Finmeccanica, S.p.A., an Italian aerospace and defense company, through the creation of two sister companies. We owned 67%, and Alenia Spazio, a unit of Finmeccanica, owned 33%, of the first company, Alcatel Alenia Space, that combined our respective industrial space activities. Finmeccanica owned 67%, and we owned 33%, of the second company, Telespazio Holding, which combined our respective satellite operations and service activities. Exchange of our interest in joint venture with TCL Communication. On July 18, 2005, we exchanged our 45% shareholding in our joint venture with TCL Communication Technology Holdings Limited for shares of TCL Communication, which resulted in TCL Communication owning all of the joint venture company and our owning 141,375,000 shares of TCL Communication.
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4.3 STRUCTURE OF THE PRINCIPAL COMPANIES CONSOLIDATED IN THE GROUP AS OF DECEMBER 31, 2007
By percentage of share capital held.
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4.4 REAL ESTATE AND EQUIPMENT
We occupy, as an owner or tenant, a large number of buildings, production sites, laboratories and service sites around the world. There are two distinct types of sites with different sizes and features: production and assembly sites dedicated to our various businesses; sites that house research and innovation activities and support functions, which cover a specific region and all businesses. A significant portion of assembly and research activities are carried out in Europe and China for all of our businesses. We also have operating subsidiaries and production and assembly sites in Canada, the United States, Mexico, Brazil and India. At December 31, 2007, our total production capacity was equal to approximately 361,000 sq. meters and the table below shows the geographic region by business segment of such production capacity. We believe that these properties are in good condition and meet the needs and requirements of the Groups current and future activity and do not present an exposure to major environmental risks that could impact the Groups earnings. The environmental issues that could affect how these properties are used are mentioned in Section 5.12 of this annual report.
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We have an alliance with Datang Mobile to foster the development of the TD-SCDMA (Time Division-Synchronized Code Division Multiple Access) 3G mobile standard in China, where we deployed trial TD-SCDMA networks in 2006. In addition, we have a number of partnerships for the development of equipment and services based on Advanced Telecom Computing Architecture (or ATCA), a standard that reduces the cost and complexity of our customers mobile infrastructure.
CDMA2000 is the worlds leading 3G (third generation) wireless technology with over 400 million subscribers worldwide according to the CDG (CDMA Development Group). It is deployed in spectrum ranging from 450 Mhz to 2100 Mhz, with each carrier network deployed in smaller increments of spectrum than competing wireless product offerings. CDMA2000 provides operators with a path to increase capacity and coverage with minimum hardware and software upgrades. The most current technology, known as 1XEV-DO (Evolution Data Only) Revision A (Rev A), enables operators to offer high speed data supporting two-way, real-time data applications such as VoIP (voice over Internet Protocol), mobile video, push-to-talk and push-to multimedia. The next enhancement, Revision B, is expected to provide improvements significantly increasing bandwidth with minimal hardware and software upgrades. Despite increases in both CDMA subscribers and traffic volumes, we believe the market for CDMA infrastructure is mature and starting to decline. We have revised our long-term outlook for this market, taking into account recent changes in market conditons as well as the potential negative impact of future technology evolutions. As with any product or technology that reaches a mature point in its life cycle, we will moderate our R&D investments in the current generation of CDMA to reflect the declines that will naturally take place in this market over time. We also expect some new opportunities to arise within the overall CDMA market, such as VoIP and the next version of the CDMA standard, and we will continue to invest to support our customers plans to incorporate those capabilities. As a mature technology, CDMA is also proving attractive to emerging markets as a cost-effective way to deliver both high capacity voice and data with an evolution path to next generation capabilities.
Enterprise segment revenues were 1,420 million in 2006, an increase of 13.8% over revenues of 1,248 million in 2005. The inclusion of Lucents activity in December 2006 had no significant impact on this increase. The segment posted steady gains throughout the year, driven by the ongoing migration to IP telephony, strong demand in IP networking and the segments strong position in contact center product offerings. Income from operating activities before restructuring costs, impairment of intangible assets and gain/(loss) on disposal of consolidated entities was 109 million for 2006 compared to 111 million in 2005, a decrease of 1.8%. This decrease was primarily due to the competitive pricing pressure in our business communication activity, while the profitability of our contact center business remained fairly stable.
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Services segment revenues were 1,721 million in 2006, an increase of 24.9% over revenues of 1,378 million in 2005; more than half of this increase was attribuable to Lucents results in December 2006. The transformation to an all-IP infrastructure is driving an increasing need for network integration services to address the complex end-to-end services our customers are deploying. Our services business is also seeing increased opportunities associated with the evolution to converged or blended services, network optimization and the outsourcing of network operations. Income from operating activities before restructuring costs, impairment of intangible assets and gain/(loss) on disposal of consolidated entities was 195 million for 2006 compared with 212 million in 2005, a decrease of 8.0%. The decrease reflected a competitive pricing environment and our investment in a new IP network integration and test facility, which is a part of our strategy to support operators worldwide in their IP transformation projects.
6.6 LIQUIDITY AND CAPITAL RESOURCES Liquidity
Cash flow for the years ended December 31, 2007 and 2006
Cash flow overview
Cash and cash equivalents decreased by 493 million in 2007 to 4,377 million at December 31, 2007. This decrease was mainly due to the cash used by financing activities of 1,106 million (mainly due to repayment of short-term and long-term debt and dividend paid), which was partially offset by cash provided by investing activities of 539 million, due primarily to the cash proceeds from the sale of marketable securities and previously consolidated entities, less capital expenditures. Net cash provided (used) by operating activities. Net cash provided by operating activities before changes in working capital, interest and taxes was 413 million compared to 929 million for 2006. This decrease was primarily due to the effect of noncash items (mainly impairment losses which amounted to (2,944) million) that contributed to our net loss (group share) of 3,518 million in 2007, as compared with net loss of 106 million in 2006, which included an impairment of assets of (141) million. In order to calculate net cash provided by operating activities before changes in working capital, interest and taxes, the 3,518 million net loss for 2007 must be adjusted for financial, tax and non-cash items (primarily restructuring reserves, depreciation, amortization, impairments and provisions), net gain on disposal of non-current assets and changes in fair values and share based payments, and adjusted further for cash outflows that had been previously reserved (mainly for ongoing restructuring programs). Impairment of assets and changes in pension and other post-retirement benefit obligations represented a non-cash net positive adjustment of 2,265 million in 2007, mainly related to the impairment recorded in connection with the CDMA-EVDO and the UMTS businesses, as compared with 19 million in 2006. The positive impact of adjustments related to depreciation and amortization of tangible and intangible assets, finance costs and share-based payments increased from 792 million in 2006 to 1,731 million in 2007 due mainly to the impact of the consolidation of Lucent for the entire year 2007, compared to one month only in 2006. Income taxes and related reduction of goodwill represented also a positive adjustment of the net result for an amount of 316 million in 2007 (corresponding mainly to deferred taxes and, to a lesser extent, to current income taxes), to be compared to a negative adjustment of 37 million in 2006. On the other hand, the negative adjustment of the net income to exclude income from discontinued activities represented 610 million in 2007 (mainly due to the capital gain on the disposal of the two joint ventures in the space sector to Thales) compared to 158 million in 2006, corresponding mainly to the net result of the discontinued activities. Net cash used by operating activities was 24 million in 2007 compared to net cash provided by operating activities of 351 million in 2006. These amounts take into account the net cash used by the increase in operating working capital, vendor financing and other current assets and liabilities, which amounted to 212 million in 2007 and 409 million in 2006, which represents 197 million of less cash used in 2007 compared to 2006. The change between the two periods related to the decrease in cash used by other assets and liabilities (302 million of less cash used in 2007 compared to 2006), and was partially offset by the increase in cash used related to working capital due to a bigger increase of working capital in 2007 than in 2006, as result of the inclusion of twelve months of the activity of Lucent in 2007 compared to one month in 2006 (105 million of more cash used in 2007 compared to 2006).
Effect of the various investigations and procedures
We reiterate that our policy is to conduct our business with transparency, and in compliance with all laws and regulations, both locally and internationally. We will cooperate with all governmental authorities in connection with the investigation of any violation of those laws and regulations. Governmental investigations and legal proceedings are subject to uncertainties and the outcomes thereof are difficult to predict. Consequently, we are unable to estimate the ultimate aggregate amount of monetary liability or financial impact with respect to these matters. We believe that our current investigations and cases will not have a material financial impact on us after final decision of the authorities or final disposition. However, because of the uncertainties of government investigations and legal proceedings, one or more of these matters could ultimately result in material monetary payments by us.
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6.11 RESEARCH AND DEVELOPMENT EXPENDITURES Expenditures
In 2007, in absolute value 15.2% of revenues was spent in innovation and in supporting our various product lines. These expenditures amounted to 2.7 billion before capitalization of development expenses and excluding the impact of the purchase price allocation entries of the business combination with Lucent, as disclosed in Note 3 of the consolidated financial statements included elsewhere in this document.
In accordance with IAS 38 Intangible Assets, Research and Development expenses are recorded as expenses in the year in which they are incurred, except for development costs, which are capitalized as an intangible asset when they strictly comply with the following criteria: the project is clearly defined, and the costs are separately identified and reliably measured; the technical feasibility of the project is demonstrated; the intention exists to finish the project and use or sell the products created during the project; a potential market for the products created during the project exists or their usefulness, in case of internal use, is demonstrated; and adequate resources are available to complete the project. These development costs are amortized over the estimated useful lives of the projects concerned. Specifically for software, useful life is determined as follows: in case of internal use: over its probable service lifetime; and in case of external use: according to prospects for sale, rental or other forms of distribution. The amortization of capitalized development costs begins as soon as the product in question is released. Capitalized software development costs are those incurred during the programming, codification and testing phases. Costs incurred during the design and planning, product definition and product specification stages are accounted for as expenses. Customer design engineering costs (recoverable amounts disbursed under the terms of contracts with customers) are included in work in progress on construction contracts. With regard to business combinations, we allocate a portion of the purchase price to in-process Research and Development projects that may be significant. As part of the process of analyzing these business combinations, we may make the decision to buy technology that has not yet been commercialized rather than develop the technology internally. Decisions of this nature consider existing opportunities for us to stay at the forefront of rapid technological advances in the telecommunications-data networking industry. The fair value of in-process Research and Development acquired in business combinations is based on present value calculations of income, an analysis of the projects accomplishments and an evaluation of the overall contribution of the project, and the projects risks. The revenue projection used to value in-process Research and Development is based on estimates of relevant market sizes and growth factors, expected trends in technology, and the nature and expected timing of new product introductions by us and our competitors. Future net cash flows from such projects are based on managements estimates of such projects cost of sales, operating expenses and income taxes. The value assigned to purchased in-process Research and Development is also adjusted to reflect the stage of completion, the complexity of the work completed to date, the difficulty of completing the remaining development, costs already incurred, and the projected cost to complete the projects. Such value is determined by discounting the net cash flows to their present value. The selection of the discount rate is based on our weighted average cost of capital, adjusted upward to reflect additional risks inherent in the development life cycle. Capitalized development costs considered as assets (either generated internally and capitalized or reflected in the purchase price of a business combination) are generally amortized over three to seven years. In accordance with IAS 36 Impairment of Assets, whenever events or changes in market conditions indicate a risk of impairment of intangible assets, a detailed review is carried out in order to determine whether the net carrying amount of such assets remains lower than their recoverable amount, which is defined as the greater of fair value (less costs to sell) and value in use. Value in use is measured by discounting the expected future cash flows from continuing use of the asset and its ultimate disposal. If the recoverable value is lower than the net carrying value, the difference between the two amounts is recorded as an impairment loss. Impairment losses for intangible assets with finite useful lives can be reversed if the recoverable value becomes higher than the net carrying value (but not exceeding the loss initially recorded).
2007 ANNUAL REPORT ON FORM 20-F - 75
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Information on the current Directors and board observers
Chairman of the Board of directors Born on November 13, 1937, French national Appointed November 2006 Business address: Alcatel-Lucent 54, rue La Botie 75008 Paris France
A graduate of the Paris cole polytechnique and of the cole nationale suprieure de larmement, Mr. Tchuruk began his career within the Mobil group in a number of positions before taking up management appointments in France and the USA (1964-1979). In 1979, he became President of Mobil in the Benelux. He then joined Rhne Poulenc, the international chemical and pharmaceuticals group (1980-1986) and held several senior executive positions in the chemicals sector before becoming the companys Managing Director in 1983. He moved on to become President and CEO of Orkem (formerly CDF-Chimie), a European chemicals company working in the area of special chemicals and petrochemicals (1986-1990). He was then Chairman and CEO of Total, one of the worlds leading oil companies (1990-1995). From June 1995 to November 2006 Mr. Tchuruk was Chairman and CEO of Alcatel. On November 30, 2006 he was appointed Chairman of the Board of directors of Alcatel-Lucent. Expertise: 45 years in the industrial sector.
Current Directorships and professional positions
In France: Chairman of the Board of directors of Alcatel-Lucent, Director of Total SA and of Thales, Member of the Board of directors of cole polytechnique.
Directorships over the last 5 years
In France: Chairman and CEO of Alcatel, Director of Socit Gnrale and the Institut Pasteur. Abroad: Chairman of the Board of Alcatel USA Holdings Corp, member of the Supervisory Board of Alcatel-Lucent Holding GmbH*.
236,150 ordinary shares of Alcatel-Lucent and 215 units in FCP 2AL.
Originally appointed to the Alcatel Board in 1995. Term of office expiring during 2007.
2007 ANNUAL REPORT ON FORM 20-F - 77
Patricia F. RUSSO
CEO and Director Born on June 12, 1952, U.S. national Appointed November 2006 to 2010 Business address: Alcatel-Lucent 54, rue La Botie 75008 Paris France
A graduate from Georgetown University, she began her career in sales and marketing at IBM Corporation before joining AT&T in 1981, where she managed some of the groups largest divisions and discharged key corporate functions for more than twenty years. She also served as President and Chief Operating Officer at Eastman Kodak Company (2001-2002) before returning to Lucent, which she had helped launch in 1996, as CEO in 2002. Since November 30, 2006, she has been CEO of Alcatel-Lucent, resulting from the business combination of historical Alcatel and Lucent Technologies Inc. Expertise: 34 years in the industrial and services sectors.
50,000 400,000 120,780,266 1,428,541,640 2,697,886 300,000
100,000 800,000 241,560,532 2,857,083,280 5,395,772 600,000
272,000.00 3,964,800.00 403,406,088.44 8,173,486,665.15 13,528,427.68 2,973,600
2,726,675 28,612 4,506,992 500,000
5,453,350 57,224 9,013,984 1,000,000
13,262,790.90 224,468.53 36,236,215.68 3,040,000
The shares comprising the capital are shares of a single class since the decision at the Shareholders Meeting of April 17, 2003, which approved the conversion of the Class O shares into Alcatels ordinary shares and ADSs, as applicable. This amount takes into account the expenses related to the business combination.
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8.5 PURCHASES OF ALCATEL-LUCENT SHARES BY THE COMPANY
In 2007, we did not effect any transactions pursuant to our share repurchase program. At December 31, 2007, the number of shares held directly by Alcatel-Lucent was 25,343,255, representing 1.09% of the capital. At that date, our subsidiaries held shares representing 1.43% of our capital. At December 31, 2007, these shares were booked as a deduction from consolidated shareholders equity. The Combined Shareholders Meeting of June 1, 2007 authorized the Board of directors (or pensions delegated under French law) to repurchase Alcatel-Lucent shares up to a maximum of 10% of the capital of the company. This authorization would expire in 18 months. The maximum purchase price per share may not exceed 40 and the minimum selling price per share may not be less than 2. This program has not been implemented. At its meeting of March 25, 2008, the Board of directors proposed a resolution to be voted upon at our next Shareholders Meeting, to be held on May 30, 2008, that the existing authorization for a share repurchase program to be cancelled and that a new authorization for an 18-month repurchase program be established.
Description of the repurchase program pursuant to Articles 241-1 and following of the AMF rules
Date of the Shareholders Meeting authorizing the program
The purchase by the company of its own shares will be submitted for approval at the Combined Shareholders Meeting on May 30, 2008.
i/ Purchase price allocation of a business combination
In a business combination, the acquirer shall allocate the cost of the business combination at the acquisition date by recognizing the acquirees identifiable assets, liabilities and contingent liabilities at fair value at that date. The allocation is based upon certain valuations and other studies performed with the service of outside valuation specialists. Due to the underlying assumptions taken in the valuation process, the determination of those fair values requires estimations of the effects of uncertain future events at the acquisition date and the carrying amounts of some assets, such as fixed assets, acquired through a business combination could therefore differ significantly in the future. As prescribed by IFRS 3, if the initial accounting for a business combination can be determined only provisionally by the end of the reporting period in which the combination is effected, the acquirer shall account for the business combination using those provisional values and has a twelve-month period to complete the purchase price allocation. Any adjustment of the carrying amount of an identifiable asset or liability made as a result of completing the initial accounting is accounted for as if its fair value at the acquisition date had been recognized from that date. Detailed adjustments accounted for in the allocation period are disclosed in note 3. Once the initial accounting of a business combination is complete, further adjustments shall be accounted for only to correct errors.
Note 3 Changes in consolidated companies
The main changes in consolidated companies for 2007 were as follows: On December 2007, our 49.9% share in Draka Comteq B.V. (Draka Comteq) was sold to Draka for 209 million in cash. Under this transaction, Draka acquired full ownership of Draka Comteq. Since the initial establishment of the joint venture, Draka Comteq has been controlled by Draka and its results have been consolidated in full in the Draka consolidated financial statements and under the equity method in the Alcatel-Lucent consolidated financial statements. The gain on disposal amounted to 74 million and was recorded in line item Other financial income (loss) (see note 8). The amount of capital gain takes into account the estimated impact of an indemnity clause related to a pending litigation and, as a result, capital gain may be revised in future periods. On January 5, 2007, the Group completed the contribution to Thales of our railway signaling business and our integration and services activities for mission-critical systems not dedicated to operators or suppliers of telecommunications services, as described below. The ownership interests in two joint ventures in the space sector were sold to Thales in April 2007 for 670 million in cash, which will be subject to adjustment in 2009. The adjustments recognized in the current period that relate to the business combination with Lucent detailed in the main changes in consolidated companies during 2006 are as follows:
Note 27 Provisions
a/ Balance at closing
2007 Provisions for product sales Provisions for restructuring Provisions for litigation Other provisions (1) Total (1) Of which : portion expected to be used within one year portion expected to be used after one year 2,566 1,421 1,2,366 1,(In millions of euros) 494 1,621 1,024 597
b/ Change during 2007
(In millions of euros) December 31, 2006 Provisions for product sales Provisions for restructuring Provisions for litigation Other provisions Total Effect on the income statement: - Income (loss) from operating activities before restructuring, impairment of assets, capital gain on disposal of consolidated entities and post-retirement benefit plan amendment - restructuring costs - other financial income (loss) - income taxes - income (loss) from discontinued operations and gain/(loss) on disposal of consolidated shares Total
Utilization (370) (530) (24) (147) (1,071)
Reversals (145) (5) (10) (83) (243)
Change in consolidated companies 6 6
Other (33) (60) 98 5
December 31, 945 2,566
(642) (814) (18) (6)
(429) (809) (16) 17
Excluding provisions for product sales on construction contracts, which are accounted for in amounts due to/from customers on construction contracts (see note 18).
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At period-end, contingent liabilities exist with regard to ongoing tax disputes. Neither the financial impact nor the timing of any outflows of resources that could result from an unfavorable outcome for certain of these disputes can be estimated at present. Nevertheless, the Group currently believes that these ongoing disputes will not result in a material cash payment.
c/ Analysis of restructuring provisions
2007 Opening balance Utilization during the period (1) Charge of the period Effect of acquisition (disposal) of consolidated subsidiaries Cumulative translation adjustments and other changes Closing balance
(530) 417 (263) (18) 413
(In millions of euros) (414) 132 (7) 14 417
For 2007, total restructuring costs were 856 million (see d/ below), representing 186 million of costs, a valuation allowance of assets of 47 million and 623 million of new restructuring plans and adjustments to previous plans. In addition, a finance cost of 6 million, related to reversing the discount element included in provisions, was recorded in other financial income (loss). For 2006, total restructuring costs were 707 million (see d/ below), representing 137 million of costs and 470 million of valuation allowances or write-offs of assets mainly associated with the discontinuance of certain product lines (please refer to note 3 regarding the Nortel deal) for which the Group was committed at year end, 100 million of new restructuring plans or adjustments to previous plans (accounted for in restructuring costs) and 6 million recorded in other financial income (loss) for the amount related to reversing the discount element included in provisions. For 2005, total restructuring costs were 79 million, representing 90 million of new restructuring plans and adjustments to previous plans accounted for in restructuring and a reversal of 11 million of valuation allowance. New restructuring plans representing 32 million were accounted for in discontinued activities. In addition, a finance cost of 10 million was recorded in other financial income (loss) for the amount related to reversing the discount element included in provisions.
Lucents Separation Agreements
Lucent is party to various agreements that were entered into in connection with the separation of Lucent and former affiliates, including AT&T, Avaya, LSI Corporation (former Agere Systems before merging with LSI Corporation in April 2007) and NCR Corporation. Pursuant to these agreements, Lucent and the former affiliates have agreed to allocate certain liabilities related to each others business, and have agreed to share liabilities based on certain allocations and thresholds. Lucent is not aware of any material liabilities to its former affiliates as a result of the separation agreements that are not otherwise reflected in the consolidated financial statements. Nevertheless, it is possible that potential liabilities for which the former affiliates bear primary responsibility may lead to contributions by Lucent.
Lucents Other Commitments
2007 ANNUAL REPORT ON FORM 20-F - 235
Contract Manufacturers Lucent has outsourced most of its manufacturing operations to electronic manufacturing service (EMS) providers. Two EMS providers supply most of Lucent designed wireless and wireline products. Celestica has the exclusive right to manufacture and provide most of Lucents existing wireless products. Solectron Corporation (acquired by Flextronics in October 2007) consolidates the outsourced manufacturing of Lucents portfolio of wireline products. The agreements with Celestica and Solectron are for a minimum of three years, with no right to terminate for convenience. Lucent is generally not committed to unconditional purchase obligations in these contract-manufacturing relationships. However, there is exposure to short-term purchase commitments when they occur within the contract manufacturers lead-time for specific products or raw materials. These commitments were U.S.$ 211 million as of December 31, 2007 (U.S.$ 309 million as of December 31, 2006). Sudden and significant changes in forecasted demand requirements within the lead-time of those products or raw materials could adversely affect Lucents results of operations and cash flows. The supply contracts with Celestica and Solectron expire on June 30, 2008 and July 18, 2008 respectively.
Lucents guarantees and Indemnification Agreements
Lucent divested certain businesses and assets through sales to third-party purchasers and spin-offs to its common. shareowners. In connection with these transactions, certain direct or indirect indemnifications are provided to the buyers or other third parties doing business with the divested entities. These indemnifications include secondary liability for certain leases of real property and equipment assigned to the divested entity and certain specific indemnifications for certain legal and environmental contingencies, as well as vendor supply commitments. The time durations of such indemnifications vary but are standard for transactions of this nature. Lucent remains secondarily liable for approximately U.S.$ 131 million of lease obligations as of December 31, 2007 (U.S.$ 162 million of lease obligations as of December 31, 2006), that were assigned to Avaya, LSI Corporation (former Agere) and purchasers of other businesses that were divested. The remaining terms of these assigned leases and the corresponding guarantees range from one month to 19.5 years. The primary obligor under assigned leases may terminate or restructure the lease obligation before its original maturity and thereby relieve Lucent of its secondary liability. Lucent generally has the right to receive indemnity or reimbursement from the assignees and Alcatel-Lucent have not reserved for losses on this form of guarantee. Lucent is party to a tax-sharing agreement to indemnify AT&T and is liable for tax adjustments that are attributable to its lines of business, as well as a portion of certain other shared tax adjustments during the years prior to its separation from AT&T. Lucent has similar agreements with Avaya and LSI Corporation (former Agere). Certain proposed or assessed tax adjustments are subject to these tax-sharing agreements. The outcome of these other matters is not expected to have a material adverse effect on the Groups consolidated results of operations, consolidated financial position or near-term liquidity.
(In millions of euros) 2007 Other assets - Non-consolidated affiliates - Joint ventures - Equity affiliates - Valuation allowances Other liabilities - Non-consolidated affiliates - Joint ventures - Equity affiliates Cash (financial debt), net - Non-consolidated affiliates - Joint ventures - Equity affiliates
(1) Loan to a co-venturer (refer to note 26).
(4) (35) (45) (21)
(12) (10) (17) (23) (1) (60) (30) 29 (20) (22) (50) (32) (11) (38)
Members of the Board of Directors and members of the Groups executive committee are those present during the year and listed in the Corporate Governance section of the Annual Report. In 2007, 2006 and 2005, compensation, benefits and social security contributions attributable to members of the Board of Directors and to the executive committee members (Key management personnel) were as follows: Recorded expense in respect of compensation and related benefits attributable to Key management personnel during the year.
2007 ANNUAL REPORT ON FORM 20-F - 237
(In millions of euros) 2007 Short-term benefits Fixed remuneration Variable remuneration Directors fees Employers social security contributions Termination benefits and retirement indemnities Other benefits Post-employment benefits Share-based payments (stock option plans) Total
(1) Variable remuneration and retention bonuses.
Note 33 Employee benefit expenses and staff training rights
Wages and salaries Restructuring costs
2007 5,(258) (544) 5,315
(In millions of euros) 3,392 3,(31) 3,45 3,848
Post-retirement benefit plan amendment Net employee benefit expenses
Financial component of pension and post-retirement benefit costs
Including social security expenses and operational pension costs. This is reported in Income (loss) from operating activities before restructuring costs, impairment of assets, gain/(loss) on disposal of consolidated entities and post-retirement benefit plan amendment. See note 27d. See note 25e. See note 8.
The law of May 4, 2004 in France provides French company employees with the right to receive individual training of at least 20 hours per year that can be accumulated over six years. Rights related to terminated or dismissed employees exercised during the notice period and rights exercised by employees considered as not adapted to the needs of their employer or not professional in nature, are assimilated to short and long-term employee benefits as defined in IAS 19 and have been provided for accordingly. All other rights are accounted for as incurred, as Alcatel-Lucent expects to receive an amount of economic benefits from the training to be taken that exceeds the costs to be incurred to settle the present obligation. Accumulated individual staff training rights were 844,515 hours at December 31, 2007 (652,811 hours at December 31, 2006 and 601,179 hours at December 31, 2005). Rights exercised so far are not material.
240 - 2007 ANNUAL REPORT ON FORM 20-F
In October 2005, a purported class action was filed by Peter A. Raetsch, Geraldine Raetsch and Curtis Shiflett, on behalf of themselves and all others similarly situated, in the U.S. District Court for the District of New Jersey. The plaintiffs in this case allege that Lucent failed to maintain health care benefits for retired management employees as required by the Internal Revenue Code, the Employee Retirement Income Security Act, and the Lucent pension and medical plans. Upon motion by Lucent, the court remanded the claims to Lucents claims review process. A Special Committee was appointed and reviewed the claims of the plaintiffs and Lucent filed a report with the Court on December 28, 2006. The Special Committee denied the plaintiffs claims and the case has returned to the court, where limited discovery has been completed and motions for summary judgment are currently pending. The Equal Employment Opportunity Commission (EEOC) filed a purported class action lawsuit against Lucent, EEOC v. Lucent Technologies Inc., in the U.S. District Court in California. The case alleges gender discrimination in connection with the provision of service credit to a class of present and former Lucent employees who were out of work because of maternity prior to 1980 and seeks the restoration of lost service credit prior to April 29, 1979, together with retroactive pension payment adjustments, corrections of service records, back pay and recovery of other damages and attorneys fees and costs. The case is stayed pending the disposition of another case raising similar issues. In the related case, the U.S. 9th Circuit Court of Appeals recently found against the defendant employer. The defendant employer in the related case has filed an appeal to the U.S. Supreme Court. Intellectual property cases Each of Alcatel-Lucent, Lucent and certain other entities of the Group is a defendant in various cases in which third parties claim infringement of their patents, including certain cases where infringement claims have been made against its customers in connection with products the applicable Alcatel-Lucent entity has provided to them, or challenging the validity of certain patents. Microsoft On February 22, 2007, after a three-week trial in U.S. District Court in San Diego, California, a jury returned a verdict in favor of Lucent against Microsoft in the first of a number of scheduled patent trials. In this first trial involving two of Lucents Audio Patents, the jury found all the asserted claims of the patents valid and infringed, and awarded Lucent damages in an amount exceeding U.S.$ 1.5 billion. This figure includes damages based on foreign sales (approximately 45% of sales), but a recent U.S. Supreme Court decision would likely eliminate that component of damages. On August 6, 2007, the U.S. District Court in San Diego issued a judgment as a matter of law reversing the jury verdict and entering judgment in favor of Microsoft. Lucent has appealed this ruling to the Court of Appeals for the Federal Circuit. Lucent, Microsoft and Dell are involved in a number of patent lawsuits in various jurisdictions. In the summer of 2003, the Dell and Microsoft lawsuits in San Diego, California, were consolidated in federal court in the Southern District of California. The court scheduled a number of trials for groups of the Lucent patents, including the trial described above. Additional trials in this case against Microsoft and Dell are scheduled in 2008. One of those cases involves counterclaims that Microsoft has asserted against Alcatel-Lucent alleging that certain Alcatel-Lucent products infringe various Microsoft patents. Other Lucent litigation Winstar Lucent is a defendant in an adversary proceeding originally filed in U.S. Bankruptcy Court in Delaware by Winstar and Winstar Wireless, Inc. in connection with the bankruptcy of Winstar and various related entities. The trial for this matter concluded in June 2005. The trial pertained to breach of contract and other claims against Lucent, for which the trustee for Winstar was seeking compensatory damages of approximately U.S.$ 60 million, as well as costs and expenses associated with litigation. The trustee was also seeking recovery of a payment Winstar made to Lucent in December 2000 of approximately U.S.$ 190 million plus interest. On December 21, 2005, the judge rendered his decision and the verdict resulted in a judgment against Lucent for approximately U.S.$ 244 million, plus statutory interest and other costs. As a result, Lucent has recognized a U.S.$ 303 million provision (including related interest and other costs of approximately U.S.$ 59 million) as of December 31, 2007. In addition, U.S.$ 311 million of cash is collateralizing a letter of credit that was issued during the second quarter of fiscal year 2006 in connection with this matter. Additional charges for post-judgment interest will be recognized in subsequent periods until this matter is resolved. On April 26, 2007, the U.S. District Court for the District of Delaware affirmed the decision of the Bankruptcy Court. Lucent has filed a notice of appeal of this decision with the United States Court of Appeals. NGC On August 8, 2003, NGC filed an action in the U.S. District Court for the Southern District of New York against Lucent, certain former officers and employees, Lucent subsidiary, Lucent Technologies International Inc., certain unaffiliated individuals and an unaffiliated company, alleging violations of the Racketeer Influenced Corrupt Organizations Act (RICO) and other improper activities. These allegations relate to activities in Saudi Arabia in connection with certain telecommunications contracts involving Lucent, the Kingdom of Saudi Arabia and other entities. The complaint seeks damages in excess of U.S.$ 63 million, which could be tripled under RICO. The allegations in this complaint appear to arise out of certain contractual disputes between NGC and Lucent that are the subject of a separate case that NGC previously filed against Lucent in U.S. District Court in New Jersey and other related proceedings brought by NGC in Saudi Arabia. On March 1, 2006, the District Court in New York granted Lucents motion to dismiss the case in its entirety. NGC has filed a notice of appeal. The parties have signed a settlement agreement calling for the global settlement of all claims NGC may have against Lucent. Included in this settlement are the suits filed in New Jersey and New York described above as well as all other claims filed by NGC against Lucent or its agent in Saudi Arabia. It is expected that the settlement agreement could take up to a year to be fully consummated.
SGH-T239 12 STX Editor CDE-101RM APC 500 Guide SPH-S5150 HRS-8 PF3220 E-TEN X800 THR880 Horrorland PCG-K33 RC6800 Waht-SD1 TCM 169 DUO 1200 SR3NA-S Abit VP6 Riva 800 M1063 P370 RF Xdrive 48I LV-7215 MA-1350-2 Photosmart 325 Dslr-A700 EWT19S3 LAC4810 Fo-785 JFS516 Review Wsat-2 Mpix-331R NX7000 LCT2701TD FX-7400G AL140 VPC750BT Adsl LM729 EAX600 RE-29FA34RB DR880 RSG5furs1 Photosmart 3300 Motoslvr L7 DVD-CM350 QX5FD Gzhd7US-GZ-hd7 380 AC 230 S Configuration FP567 SVK31TS Start 75620-W Player TX-34P300X 2200C BV3950T CCD-Z7 DA6341 PDX-8 DRA-395 HD D45 Nokia S60 EWT800 CPX1250 RSG5purs1 LW15E23C MAC 540E Chrome Recorder Framemaker 7 ZR830 Triax 10 Aficio 1013 Booklet MS7000 Xerox 2400 FAX-30 DW400 ESF473 GPS 18 LV400 35 BCE PRO 10 RS21fgrs KDC-MP205 French SA-VE525 TX802 Loox 400 ZWG-3125 RA150 961XD Samsung L110 Coolpix 8800 VGN-AR41L Z8020
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