Alcatel-Lucent cut its revenue forecast for the year on Thursday, underscoring the challenges the newly merged company faces in a highly competitive communications equipment industry.
The company now expects its revenue to be flat or up slightly in 2007, compared with an earlier forecast that it would grow in the mid-single digits along with the overall carrier market. (Both estimates use a constant exchange rate between the euro and U.S. dollar.) In its new forecast, Alcatel-Lucent cited discussions with wireless customers in North America that led it to anticipate weaker spending than it had expected among them this year. Growth in sales volume won't make up for falling prices, Alcatel-Lucent said.
As a result, the company expects only to break even in the current quarter. In the second quarter, which ended June 30, it reported an adjusted net loss of €336 million, or $455 million as of June 30, the last day in the period being reported.
France's Alcatel bought troubled U.S. infrastructure vendor Lucent last year as the companies faced Asian competitors, such as Huawei Technologies, as well as consolidation among telecommunications carriers and vendors. It cut 3,800 jobs in the first half of the year and still expects to reach a target of €600 million in pre-tax savings from the merger this year, but the merger hasn't led to strong results.
The market has lashed out: Alcatel-Lucent's shares (ALA) on the New York Stock Exchange started this year over $15 and are now below $10. On Thursday's news, the stock fell $0.88 to close at $9.16.
The company is taking steps to speed up its post-merger restructuring and carry out additional focused cost-cutting plans, CEO Patricia Russo said in a prepared statement on Thursday.
Alcatel-Lucent does expect some improvement from quarter to quarter. It forecast third-quarter revenue up slightly from the second quarter and a strong increase in the last quarter of the year. Bright spots in its worldwide business include the wireline and enterprise network business, as well as sales in the Asia-Pacific region.