PARIS, October 30 /PRNewswire/ --

Key Highlights for the Quarter

    - Revenues of Euro 4.065 Billion, Down 0.9% Sequentially

    - Adjusted(2) Gross Profit of Euro 1.320 Billion or 32.5% of Revenues
     (33.0% excl. one time item)

    - Adjusted(2) Operating Income(1) of Euro 40 Million or 1.0% of Revenues

    - Adjusted(2) Net Income (Group Share) of Euro 41 Million or Euro 0.02
      per Diluted Share

    - Reported Net Loss (Group Share) of Euro (40) Million or Euro (0.02) per
      Diluted Share

    - Net Debt of Euro (600) Million at September 30, 2008

    - Funded Status of Pensions and OPEB Shows Surplus of Euro 2.997 Billion
      at September 30, 2008



Note: 3rd quarter 2008 reported and adjusted income statement is enclosed 
in Annex, please visit http://www1.alcatel-lucent.com/3q2008/pdf/annex_E.pdf

Alcatel-Lucent's Board of Directors (Euronext Paris and NYSE: ALU) 
reviewed and approved reported results for the third quarter 2008.

During the quarter, revenues declined 6.6% year-over-year and decreased
0.9% sequentially to Euro 4.065 billion. At constant exchange rate, revenues
declined 2.2% year-over-year and 2.9% sequentially. At constant exchange rate
and on a year-over-year basis, Carrier revenues declined 9.4%, Enterprise
revenues grew 6.3% and Services revenues grew 16.6%. The adjusted(2) gross
margin was 32.5% of revenues, or 33.0% excluding a currency hedging loss of
Euro 23 million. Adjusted operating expenses declined 9.6% year-over-year and
4.5% sequentially, leading to an adjusted(2) operating income(1) of Euro 40
million or 1.0% of revenues. Adjusted(2) net income was Euro 41 million or 
Euro 0.02 per diluted share, including a one-time income of Euro 63 million 
pre tax and of Euro 38 million after tax resulting from the amendment of the 
post retirement healthcare plan.

Executive commentary

Ben Verwaayen, CEO commented: "I am delighted to have joined
Alcatel-Lucent, a company which has the talent, technologies and customer
base to grow profitably in its market.

First, let me state that we are in good shape from a cash
standpoint. We achieved a positive cash flow from operating activities this
quarter through the reduction of our operating working capital requirements.
The funded status of our pensions and other post retirement benefits remains
materially positive with a prudent asset allocation. With gross cash on hand
and marketable securities of Euro 4.46 billion and less than Euro 1 billion
worth of bond debt maturing in the next 12 months, we are adequately funded.

Second, we met our revenue guidance in a more challenging macroeconomic
environment. In addition to the ongoing CDMA decline, we saw a reduction in
spending by certain customers in developed markets, especially in fixed
access and terrestrial optics. This was partly offset, however, by the strong
performance of certain carrier activities, including W-CDMA, NGN and
submarine networks. In addition, we continued to grow our Enterprise business
at a healthy rate and saw accelerated growth in Services.

Having said that, our profitability remains unsatisfactory.
The gross margin came in at the lower end of our expectations in the third
quarter, reflecting an adverse shift in both our product and geographic
mixes. In the carrier space, this was coupled to a declining top-line and led
to an adjusted operating loss which calls for a set of actions that I will be
describing over the coming period. I would nonetheless point to the high
single-digit operating margin in the Enterprise segment and the double-digit
operating margin in Services."

Market and outlook

In its outlook for the third quarter, Alcatel-Lucent was
already prudent in its view about the telecommunications market due to a
weakening macroeconomic environment. Today, the company continues to
anticipate that the global telecommunications equipment and related services
market should be flat in 2008 at constant currency.

Alcatel-Lucent reiterates that its full year 2008 revenue,
expressed in current Euro rate, should be down in the low to mid single-digit
range. The company continues to expect an adjusted gross margin in the mid
thirties and an adjusted operating margin in the low to mid single-digit
range in percentage of revenue in full year 2008.

Based on its outlook for the fourth quarter, the company
continues to expect its year-end net debt to be materially reduced compared
to the level at the end of June 2008.

THALES

Alcatel-Lucent believes that it is possible to maintain its
ongoing partnerships with Thales without necessarily having any capital tie.
The company is currently reviewing all options regarding its 20.8% stake in
Thales, including a potential sale, in the best interest of its shareholders.

Reported results

For the third quarter 2008, Alcatel-Lucent's reported revenues
amounted to Euro 4,065 million. The reported gross profit was Euro 1,319
million. Reported operating loss(1) was Euro (85) million, including the
negative impact from Purchase Price Allocation (PPA) entries of Euro (125)
million. For the quarter, reported net loss (group share) was Euro (40)
million or Euro (0.02) per diluted share (USD (0.03) per ADS), including the
negative after tax impact from PPA entries of Euro (81) million.

Adjusted results

In addition to the reported results, Alcatel-Lucent is
providing adjusted results in order to provide meaningful comparable
information, which exclude the main non-cash impacts from PPA entries in
relation to the Lucent business combination. These non-cash impacts are very
material and non-recurring due to the different amortization periods
depending on the nature of the adjustments, as detailed in the annex.
Reported figures are not comparable with our main competitors and many
business players who have not undergone any similar business combinations as
the Alcatel and Lucent one.

For the third quarter 2008, Alcatel-Lucent generated revenues
of Euro 4,065 million, compared to Euro 4,350 million in the year-ago
quarter, a decrease of 6.6%. The adjusted(2) gross profit was Euro 1,320
million or 32.5% of revenues, compared to an adjusted(2) gross profit of EUR
1,486 million or 34.2% of revenues in the year ago-quarter. Adjusted(2)
operating income(1) was Euro 40 million, 1.0% of revenues, compared with an
adjusted(2) operating profit of Euro 70 million or 1.6% of revenues in the
year-ago quarter. Adjusted(2) net income (group share) was Euro 41 million or
Euro 0.02 per diluted share (USD 0.03 per ADS), compared to an adjusted(2) 
net loss of Euro (258) million or Euro (0.11) per share (USD (0.16) per ADS) 
in the year-ago quarter.

Balance sheet and pension status

The net (debt)/cash position was Euro (600) million as of September 30,
2008, compared with Euro (415) million as of June 30, 2008. The increase in
net debt of Euro (185) million primarily reflects the low level of operating
profitability this quarter, the cash outflow related to restructuring plans
(Euro (113) million), a still high contribution to pensions (Euro (98)
million) and the impact of currency translation on our net debt position
(Euro (68) million) partially offset by a Euro 128 million reduction in total
working capital requirements.

The funded status of pensions and Other Post Employment Benefits (OPEB)
amounted to a surplus of Euro 2.997 billion as of September 30, 2008, up from
Euro 2.848 billion as of June 30, 2008. This increase essentially reflects a
favourable currency translation impact on the funded status of US plans,
which was stable sequentially in USD terms. The funded status of our non US
plans decreased slightly.

Key figures

Adjusted Profit & Loss       Third   Third  % change, Second  % change
    Statement                   quarter quarter   y-o-y   quarter   q-o-q
    In Euro million except for   2008    2007   (% or pt)  2008   (% or pt)
    EPS

    Revenues                     4 065   4 350    -6,6%    4 101    -0,9%

    Gross profit                 1 320   1 486   -11,2%    1 433    -7.9%

    in % of revenues              32.5%   34.2%   -1.7 pt   34.9%   -2.5 pt

    Operating income (1)            40      70   -42.9%       93   -57.0%

    in % of revenues               1.0%    1.6%   -0.6 pt    2.3%   -1.3 pt

    Net income (loss) (Group      
    share)                          41    -258     Nm       -222      nm

    EPS diluted (in Euro)         0.02   -0,11     Nm      -0,10      Nm

    E/ADS* diluted (in USD)       0.03   -0,16     Nm      -0,15      Nm

    Number of diluted shares    
    (million)                   2260.4  2257.1    0,1%    2259.1    0,1%



*E/ADS calculated using the US Federal Reserve Bank of New York noon
Euro/dollar buying rate of USD 1.4081 as of September 30 2008, USD 1.4219 as
of September 28 2007 and USD 1.5748 as of June 30 2008.

Segment breakdown           Third   Third  % change,   Second  % change
    of revenues                quarter quarter   y-o-y     quarter   q-o-q

    (In Euro million)           2008    2007   (% or pt)    2008   (% or pt)
    Carriers                   2 734   3 142    -13.0%     2 811    -2.7%
    Enterprise                388.10  379.60      2.2%    386.00    0.54%
    Services                     870     776     12.1%       818     6.4%
    Other & eliminations          73      52     39.1%       87    -15.7%
    Total group revenues       4 065   4 350     -6.6%    4 101     -0.9%



Breakdown of segment          Third   Third  % change, Second  % change
    operating income (1)(loss)    quarter quarter   y-o-y   quarter   q-o-q
    
    (in Euro million)              2008    2007   (% or pt)  2008   (% or pt)
    Carriers                        -91     21       Nm       11       Nm
    In % of revenues               -3.3%   0.7%    -4.0 pt   0.4%    -3.7 pt
    Enterprise                       29     29      1.4%      29      0.3%
    In % of revenues                7.5%   7.5%    -0.1 pt   7.5%     0.0 pt
    Services                         87     40    117.5%      71     23.1%
    In % of revenues               10.0%   5.2%     4.8 pt   8.6%     1.4 pt
    Other & eliminations             15    -20       Nm      -18       Nm
    Segment op. income               40     70       Nm       93    -57.0%
    (loss)



Cash Flow highlights                 Third quarter    Second       Third
                                                          quarter     quarter
    In Euro million                          2008          2008        2007
    Net (debt)/cash at beginning of          
    period                                   -415           -30         221
    Adjusted operating income                  40            93          70
    Depreciation & Amort; OP non cash;        
    other                                     198           177         191
    Operating Cash Flow *                     238           270         261
    Change in operating & other WCR           128          -150        -263
    Interest                                  -36           -16         -21
    Taxes                                     -14           -48         -13
    Dividends received from equity              
    affiliates                                  0            41           0
    Cash contribution to pension & OPEB       -98          -112         -54
    Restructuring cash outlays               -113          -166        -128
    Cash flow from operating activities       105          -181        -218
    Capital expenditures (incl. R&D          
    cap.)                                    -217          -203        -191
    Free Cash Flow                           -112          -384        -409
    Disposals, Discontinued, Cash from        
    financing & Forex                         -73            -1          64
    Change in net(debt)/cash position        -185          -385        -345
    Net (debt)/cash at end of period         -600          -415        -124

    * Before changes in working capital, interest/tax paid, restructuring
    cash outlay and pension & OPEB cash outlay



Balance sheet - Assets                    Sept. 30,   June 30,  Sept. 30,
    In Euro million                              2008       2008       2007

    Total non-current assets                   18 941     18 348     23 303
    of which Goodwill & intangible assets,      
    net                                        10 644     10 004     14 423
    of which Prepaid pension costs              3 053      3 129      3 412
    of which marketable securities                  0          0         56
    of which Other non-current assets           5 244      5 215      5 412
    Total current assets                       12 941     12 595     13 403
    of which OWC assets                         6 991      6 902      7 124
    of which other current assets               1 489      1 284      1 342
    of which marketable securities, cash &      
    cash equivalents                            4 461      4 409      4 937
    Total assets                               31 882     30 943     36 706



Balance sheet - Liabilities and           Sept. 30, June 30,   Sept. 30,
    shareholders' equity                       2008      2008        2007
    In Euro million    
                        
    Total shareholders equity                 10 432     9 957      14 473
    of which attributable to the equity         
    holders of the parent                      9 867     9 445      13 984
    of which minority interests                  565       512         489
    Total non-current liabilities              9 966     9 801      11 663
    of which pensions, and other               3 960     3 967       4 499
    post-retirement benefits
    of which long term debt                     3 900     3 649      4 827
    of which other non-current liabilities      2 106     2 185      2 337
    Total current liabilities                  11 484    11 185     10 570
    of which provisions                         2 541     2 545      2 705
    of which short term debt                    1 204     1 194        323
    of which OWC liabilities                    5 546     5 394      5 434
    of which other current liabilities          2 193     2 052      2 108
    Total liabilities and shareholder's        31 882    30 943     36 706
    equity



Business Commentary

Please note that all the following business comments are based
on a year-over-year comparison at constant exchange rate, unless otherwise
specified.

Carrier Operating Segment

For the third quarter 2008, revenues for the Carrier operating segment
were Euro 2,734 million compared to Euro 3,142 million in the year-ago
quarter, a 13.0% decrease at current exchange rate and a 9.4% decrease at
constant rate. The segment posted an adjusted(2) operating(1) loss of Euro 
(91) million or an operating margin of (3.3) % compared to a profit of Euro 
22 million or a margin of 0.7% in the year ago period.

Key highlights:

    - Fixed access revenue decreased at a strong double-digit
      rate. The ongoing decline in new subscribers to copper-based broadband
      access, coupled with a rapidly deteriorating economic environment led 
      certain customers in North America and Europe to reduce their capital 
      expenditure plans for fixed access, thus impacting both our DSL and 
      Digital Loop Carrier (DLC) activities. Alcatel-Lucent shipped 6.1 
      million DSL ports in the quarter, down 23% from the year-ago quarter 
      and 21% sequentially. On the other hand, revenue from FTTH solutions 
      more than doubled this quarter, taking the year-to-date growth to more 
      than 60%. Alcatel-Lucent further reinforced its leadership position in 
      next generation broadband access both in FTTN, where it was selected by 
      KPN as its exclusive supplier and in FTTH where it announced several 
      contract wins, including EPB in US, Telecom Malaysia and Neuf Cegetel 
      in France as part of a social housing project in Paris.

    - In data networking, revenue from its IP/MPLS service routers
      enjoyed solid growth both year over year and sequentially, shipping to 
      more than 20 new customers, taking the total to more than 250 customers 
      to date. Alcatel-Lucent announced new wins with Eircom (Ireland), Bezeq 
      (Israel), EPB Telecom (USA) and Telecom Malaysia. The company's 
      solution for mobile backhauling (7705 Service Aggregation Router), is 
      also gaining traction with more than 20 customers and 20 additional 
      trials. The ATM switching business continued on its structural decline 
      path.

    - Optical networking grew slightly this quarter, a contrast with the 
      double-digit growth rate reported in the first half, reflecting a 
      slowdown in the terrestrial optical networking market. Submarine 
      networks and microwave transmission activities grew at a strong 
      double-digit rate.

    - In mobile networks, GSM revenue declined this quarter, due to the 
      temporary freeze on networks expansion in China during the Olympics. 
      W-CDMA revenue doubled this quarter, as it continued to benefit from a 
      strong ramp-up in revenues in France, the US and Korea. Alcatel-Lucent 
      won several new W-CDMA customers in the third quarter including Vodacom 
      in South Africa and BSNL/ITI in India. Year to date, the company has 
      been selected by 11 new W-CDMA customers, taking the total to more than 
      50. CDMA revenues declined materially year-over-year but recovered 
      sequentially, as the company began shipments to a Chinese customer.

    - LTE: in the past months, the roadmaps as well as the technical and 
      business requirements of key operators around the world have 
      significantly evolved. Recognizing the diversity of the market, 
      Alcatel-Lucent and NEC are further optimizing the scope and format of 
      their technical collaboration in the LTE radio access space. The two 
      companies are currently considering the opportunity to focus their 
      technical cooperation on selected parts of the LTE radio access 
      platform, in the form of specific joint development agreements as 
      appropriate. Alcatel-Lucent is fully committed to providing its 
      customers with a superior end-to-end LTE solution. The company has 
      already accelerated its global LTE development program in the past two 
      quarters, and will continue to do so to meet the roadmap and 
      requirements of its key customers around the globe.

    - The company's core switching activities declined moderately year over 
      year, as the decline in legacy TDM voice was almost entirely offset by 
      the strong, double-digit growth in NGN.

    - Applications had a softer quarter due to a slowdown in legacy Messaging 
      and IN (Intelligent Networks) activities. Revenue from Subscriber Data 
      Management and Multimedia applications continued to enjoy strong 
      double-digit growth driven by Asia and the Americas.



Enterprise Operating Segment

For the third quarter 2008, revenues for the Enterprise
operating segment were Euro 388 million compared to Euro 380 million in the
year-ago quarter, an increase of 2.2% at current exchange rate and of 6.3% at
constant rate. Adjusted(2) operating income(1) was Euro 29 million, or 7.5% 
of revenues, flat from last year.

Key highlights:

    - Enterprise Solutions grew in the mid single-digit range.
      This was driven by Data networking which enjoyed its seventh 
      consecutive quarter of double-digit growth as well as the sustained 
      momentum in sales of voice solutions to large enterprises, more than 
      offsetting the slowdown in demand from small and medium businesses.

    - Genesys, the contact centre software activity, grew at a
      high single-digit rate this quarter versus a double-digit rate in the 
      first half, due to a slowdown in professional services.

    - From a geographic standpoint, the segment saw double-digit growth in 
      both North America and Latin America and low-single digit growth in 
      both Europe and Asia.

    - The adjusted operating margin of the Enterprise segment was stable both 
      year-over-year and sequentially, at a rather high level.

Services Operating Segment

For the third quarter 2008, revenues for the Services
operating segment were Euro 870 million compared to Euro 776 million in the
year-ago quarter, an increase of 12.1% at current exchange rate and of 16.6%
at constant rate. Adjusted(2) operating income(1) was Euro 87 million or 
10.0% of revenues compared to Euro 40 million or 5.2% of revenues in the year
ago quarter.

Key highlights:

    - Network operations enjoyed accelerated growth this quarter,
      both in revenues and orders due to the ramp-up of some of the large 
      contract wins announced since the start of the year.

    - Network integration grew in the high teens this quarter, a
      somewhat slower growth than in the first half, due to the slowdown in 
      the part of the business which is attached to the sale of carrier 
      products. Alcatel-Lucent nevertheless continued to enjoy very strong 
      growth in complex network design, network optimisation and network 
      transformation projects.

    - Growth in Professional services - which include the integration of 
      software applications either from Alcatel-Lucent or third parties - 
      accelerated to the high teens this quarter compared to the high
      single-digit growth achieved in the first half, driven by IPTV and OSS
      integration.

    - Finally, Maintenance returned to double-digit growth this quarter, 
      driven both by multivendor maintenance and legacy maintenance.

    - The segment reached double-digit operating profitability this quarter, 
      due to the strong year-over-year increase in revenue, a good mix and an 
      improvement in the gross margin in all four activities.

Alcatel-Lucent will host a press and analyst conference at its
headquarters at 1:00 p.m. CET which can be followed through audio webcast at
http://www.alcatel-lucent.com/3q2008

Notes

All adjusted figures are unaudited.

1- Operating income (loss) is the Income (loss) from operating
activities before restructuring costs, impairment of assets, gain (loss) on
disposals of consolidated entities and post-retirement benefit plan
amendment.

2- "Adjusted" refers to the fact that it excludes the main
impacts from Lucent's purchase price allocation (See annex for detailed
information).

2009 Upcoming events/ announcements

February 4, 2009 Fourth quarter and full year 2008 results

About Alcatel-Lucent

Alcatel-Lucent (Euronext Paris and NYSE: ALU) is the trusted
partner of service providers, enterprises and governments worldwide,
providing solutions that to deliver voice, data and video communication
services to end-users. A leader in fixed, mobile and converged broadband
networking, IP technologies, applications and services, Alcatel-Lucent
leverages the unrivalled technical and scientific expertise of Bell Labs, one
of the largest innovation powerhouses in the communications industry. With
operations in more than 130 countries and the most experienced global
services organization in the industry, Alcatel-Lucent is a local partner with
a global reach. Alcatel-Lucent achieved revenues of Euro 17.8 billion in 2007
and is incorporated in France, with executive offices located in Paris. For
more information, visit Alcatel-Lucent on the Internet:
http://www.alcatel-lucent.com

SAFE HARBOR FOR FORWARD LOOKING STATEMENTS

Except for historical information, all other information in
this presentation consists of forward-looking statements within the meaning
of the US Private Securities Litigation Reform Act of 1995, as amended. These
forward looking statements include statements regarding the future financial
and operating results of Alcatel-Lucent such as (i) expected revenues,
adjusted gross margin and adjusted operating margin for full year 2008 and
(ii) net debt at year end 2008. Words such as "expects," "anticipates,"
"targets," "projects," "intends," "plans," "believes," "estimates,"
variations of such words and similar expressions are intended to identify
such forward-looking statements which are not statements of historical facts.
These forward-looking statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult to
assess. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements. These
risks and uncertainties are based upon a number of important factors
including, among others: our ability to operate effectively in a highly
competitive industry with many participants; our ability to keep pace with
technological advances and correctly identify and invest in the technologies
that become commercially accepted; difficulties and delays in achieving
synergies and cost savings; fluctuations in the telecommunications market;
exposure to the pricing pressures in the regions in which we sell; the
pricing, cost and other risks inherent in long-term sales agreements;
exposure to the credit risk of customers; reliance on a limited number of
contract manufacturers to supply products we sell; the social, political and
economic risks of our global operations; the costs and risks associated with
pension and postretirement benefit obligations; the complexity of products
sold; changes to existing regulations or technical standards; existing and
future litigation; difficulties and costs in protecting intellectual property
rights and exposure to infringement claims by others; compliance with
environmental, health and safety laws; the economic situation in general
(including exchange rate fluctuations) and uncertainties in Alcatel-Lucent's
customers' businesses in particular; customer demand for Alcatel-Lucent's
products and services; control of costs and expenses; international growth;
conditions and growth rates in the telecommunications industry; and the
impact of each of these factors on sales and income. For a more complete list
and description of such risks and uncertainties, refer to Alcatel-Lucent's
Form 20-F for the year ended December 31, 2007, as well as other filings by
Alcatel-Lucent with the US Securities and Exchange Commission. Except as
required under the US federal securities laws and the rules and regulations
of the US Securities and Exchange Commission, Alcatel-Lucent disclaims any
intention or obligation to update any forward-looking statements after the
distribution of this news release, whether as a result of new information,
future events, developments, changes in assumptions or otherwise.