Alcatel Optronics to Acquire Kymata Ltd, a Leader in Next-Generation DWDM Integrated Optical Components.

Business & High Tech Editors

DALLAS & LIVINGSTON, Scotland--(BUSINESS WIRE)--July 30, 2001

Transaction strengthens Alcatel Optronics' position as a

forerunner in the integration of active and passive

optical network devices

Alcatel Optronics (Paris: CGO and NASDAQ: ALAO), a world leader in optoelectronic components for telecommunications systems, today announced it agreed to acquire privately held Kymata Ltd.

Kymata is a key player in mastering planar technology for high-end passive optical components, representing the majority of the fast growing Dense Wavelength Division Multiplexing (DWDM) market.

Under the terms of the agreement, 9.0 million Alcatel Class O shares and 2.2 million Alcatel Class A shares will be exchanged for all outstanding shares of Kymata. Based on the closing price in Paris on July 27, 2001, the transaction has an implied value of Euro 134 million.

Kymata produces Arrayed Waveguide Gratings (AWGs) multiplexer/demultiplexers, the first commercially available devices using planar processes. AWG is considered to be one of the leading technologies for the metropolitan optical network market, one of the fastest growing markets in the telecommunication industry and a strategic target for Alcatel Optronics. This acquisition also confirms Alcatel Optronics' strategy to be a major player in the integration of active and passive optical components by strengthening its planar waveguide expertise as well as its passive component product lines. Alcatel Optronics is a recognized leader in active optical components.

"Kymata is a perfect match with Alcatel Optronics and will allow us to gain at least two years in time-to-market for planar products. This acquisition is a crucial step in the implementation of our strategy of active/passive integration, which we consider to be key to the future. Their high-end passive components complement our own high-end active component portfolio," said Jean-Christophe Giroux, CEO of Alcatel Optronics. "We have identified significant synergies across the board, particularly in our marketing, sales and development efforts. In addition, I am pleased to have been able to use our stock as an acquisition currency in today's volatile market environment."

"We are very pleased to become part of the Alcatel Optronics family," said Mike Hickey, CEO of Kymata. "The deal is a win-win for Kymata, our people and for Scotland. It provides our business with the resources and scale needed to achieve market leadership in a sector that is increasingly competitive. It provides our employees with outstanding career opportunities. And it provides Scotland with a world class research, development and manufacturing facility that strengthens its standing as a leading center in the global optoelectronic market. We believe our technology is at the leading edge of next generation optical components and look forward to pooling our R&D resources with Alcatel Optronics to better and more quickly meet the market demand for cost efficient and innovative solutions."

The transaction is subject to various closing conditions and is expected to close by end of August.

Notes to editors

Planar technology

Planar technology is based on creating optical waveguides on substrates. One strong advantage of planar waveguide technology is that it can be manufactured using similar processes as those used for semiconductor manufacturing. This leads to highly reproducible performance, resulting in greater manufacturing yields and cost-effectiveness. In addition, planar waveguide technology enables passive devices to be integrated with active devices, such as lasers and detectors. Initially, planar devices can be used to create DWDM AWG multiplexers/demultiplexers, variable optical attenuators, true optical switches, and optical add/drop multiplexers -- all on one chip. Eventually as processes for combining hybrid elements develop, it may be possible to have active and passive solutions on one device.

Arrayed Waveguide Gratings technology

AWGs are used for managing DWDM signals. A multiplexer is used to combine all the wavelengths at the beginning of a DWDM route onto one fiber. A demultiplexer is used at the other end to separate out the various wavelengths. Basically each of the arms (or waves) of the waveguide has a slightly different length and this creates interference patterns that allow the separation of the wavelengths at the other end.

About Alcatel Optronics

Alcatel Optronics designs, manufactures and sells high performance optical components, modules and integrated sub-systems for use in terrestrial and submarine optical telecommunications networks. Operating state-of-the-art manufacturing plants in North America and Europe, Alcatel Optronics is a leading supplier of DWDM lasers, photodetectors, optical amplifiers, high-speed interface modules and key passive devices such as AWGs and Fiber Bragg Grating filters. It also has experience in integrating active and passive components and modules into sub-systems. The Optronics Division is part of Alcatel's Optics Group which comprises Alcatel's world-leading activities in optical networking, including submarine and terrestrial transmission systems, fiber optics and optical components. For more information, http://www.alcatel.com/optronics/

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 sales of EURO 31 billion in 2000 and 110,000 employees, Alcatel operates in more than 130 countries. For more information, http://www.alcatel.com

About Kymata

Founded in 1998, Kymata Ltd. is a technology leader providing next-generation planar and microelectromechanical systems-based integrated optical components for the networking industry. The company is dedicated to designing, fabricating, packaging and automated testing of components and sub-system level solutions to meet the high volume challenges facing the DWDM communications industry. Kymata Ltd. is one of the forerunners leading the race to the integration of active and passive devices onto silicon substrates. Based in Livingston, Scotland, the company employs around 407 persons (including 95 highly skilled R&D people) split over its six North American and European locations. For more information, http://www.Kymata.com

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: This press release contains forward-looking statements relating to (i) Alcatel Optronics' performance in future periods, (ii) Alcatel Optronics' ability to remain competitive and a leader in the industry in which it operates and its future growth and (iii) the telecom industry generally and the lines of business of Alcatel Optronics and Kymata, specifically. Statements related to the future performance involve certain assumptions, risks and uncertainties, many of which are beyond the control of Alcatel Optronics or Kymata, and include, amongst others, applicable regulatory approvals, growth and customer spending patterns in the telecommunications market, foreign and domestic product and price competition, cost effectiveness, changes in governmental regulations, general economic and market conditions in various geographic areas, interest rates and the availability of capital. Although Alcatel Optronics and Kymata believe their respective expectations reflected in any such forward-looking statements are based on reasonable assumptions, they can give no assurance that those expectations will be achieved; actual results could differ materially from the above as a result of these or other factors. Unfavorable changes in the above or other factors listed under "Risk Factors" from time to time in Alcatel's SEC reports, could materially affect Alcatel Optronics.

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