Alcatel and Flextronics sign strategic partnership for GSM manufacturing



Paris and Singapore - April 26, 2001 - Alcatel (Paris: CGEP.PA, NYSE: ALA) and Flextronics (NASDAQ: FLEX) today announced the signing of a memorandum of understanding to outsource the European manufacturing of Alcatel's GSM handsets to Flextronics. The agreement calls for Alcatel to transfer its Laval GSM manufacturing facility to Flextronics. No financial details were announced.

Flextronics will acquire the assets of the Laval manufacturing plant, and 830 Alcatel employees will be transferred to Flextronics. As part of the agreement, the companies will build a strong partnership in terms of the industrialization engineering, purchasing, manufacturing, logistics management.

The announcement is one part of Alcatel's strategy to consolidate its European GSM handset manufacturing which has been presented today to Alcatel workers councils. Both Alcatel's and Flextronics' objective is to sign the final agreement by the end of June. The company also announced today that it will phase out GSM manufacturing at its plant in Illkirch, France. That plant will be organized to manufacture components for the fast growing Alcatel Optronics business. (See separate press release).

"The GSM handsets market is maturing and Alcatel must adapt its processes to remain competitive and regain profitability," said Olivier Houssin, President Alcatel e-Business Group. "This agreement is an extension of our successful relationship with Flextronics and gives us increased flexibility and lower costs, while strengthening the future of the operations."

"We are delighted to have this opportunity to strengthen our partnership with Alcatel. The agreement is another step in our ongoing commitment to our customers which includes having manufacturing capabilities close to their existing operations and close to their key markets. Our longterm partnership now allows us to not only manufacture their products, but to also cooperate in the areas of industrialization, purchasing and logistics", said Humphrey Porter, President, Flextronics Central and Eastern Europe. "The Laval factory provides us with a very experienced, state-of-the-art facility, and with a team of very dedicated employees. This will contribute to our growing mobile phone and 3G phone manufacturing capabilities."

In the GSM mobile phone market, Alcatel has grown very successfully over the past three years to reach a market share of 10% in Europe. This partnership is a key element in Alcatel's strategy to consolidate this market share profitably in the coming years.
Flextronics has grown rapidly in the last four years to become the second largest electronics manufacturing services (EMS) provider in the world. The company will offer Alcatel its full range of services, including advanced Web-based tools for order management, production control, design and industrialization, and logistics management. The company also features a complete line of vertically integrated services including engineering and design, plastics, and PCB fabrication, which are important in reducing costs in the telecom industry.

This is another phase of a long-standing partnership between Alcatel and Flextronics.
This agreement does not affect the Alcatel's GSM manufacturing plants in China.

About Flextronics
Headquartered in Singapore, Flextronics is a leading provider of flexibility and speed in Electronics Manufacturing Services (EMS) to Original Equipment Manufacturers (OEMs) in the fast-growth communications, networking, computer, medical and consumer markets. With 65 000 employees, Flextronics is a major global operating company with design, engineering and manufacturing operations in 27 countries and four continents. This global presence allows for manufacturing excellence through a network of global facilities situated in key markets that in turn provide its customers with the resources, technology and capacity to maximize productivity. Flextronics' ability to provide design and manufacturing services, coordinate innovative product design, provide a full spectrum of specialized services and IT expertise, in conjunction with its global presence, establishes Flextronics as a top-tier EMS provider. For further information, please visit the Flextronics Web site at www.flextronics.com.

About Alcatel
Alcatel builds next generation networks, delivering integrated end-to-end voice and data networking solutions to established and new carriers, as well as enterprises and consumers worldwide. With 130,000 employees and sales of EURO 31 billion in 2000, Alcatel operates in more than 130 countries.

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