Moody's: Alcatel outlook positive

Moody's Investors Service said it changed to positive from stable the outlook on Alcatel's ratings. All ratings were also affirmed at B1.

Moody's said the outlook change reflects: (i) Alcatel having reached important milestones such as operating profitability and cash burn break-even, (ii) the expectation that ongoing cost cutting and the announced divestments will stabilize performance and underpin a gradual improvement in profitability through 2004 albeit revenue visibility in all product and service segments remains low; and (iii) the company's ability to maintain healthy liquidity and adequate financial flexibility to meet maturing debt obligations, evidenced by a healthy cash position and the ability to access the capital markets to extend its debt maturity.

Going forward, Moody's said, a number of factors are likely to influence future changes to the ratings level; such factors include the pace of revenue growth and management's implementation of its program to lower the break-even sales level, the control over working capital and capital investment should orders increase, the effectiveness of the contracted joint ventures in optical fibers and mobile phones in shielding Alcatel from further cash support requirements, and maintenance of financial flexibility by keeping high cash balances and extending credit lines.

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