Alcatel-Lucent Cuts Outlook, Shares Drop

Alcatel-Lucent, the world's largest telecommunications equipment producer, cut forecasts for full-year revenue growth and noted that it estimates third quarter operating profit to be "around break even." The Paris-based company said it projects revenue for 2007 to be flat to slightly up with a constant Euro-dollar exchange rate; it had earlier guided mid-single digit percent growth. The lowered forecast was caused by a slowdown in purchases from North American companies. Touching on the lowered sales in North America, the company said in a statement, "Alcatel-Lucent is now seeing a change in capital spending with those customers in 2007, compared to what it had anticipated. As a result, the company is not seeing the projected volume changes that would have mitigated the ongoing pricing pressures it is experiencing." Before today, Alcatel-Lucent shares were already down 33% this year. Since Alcatel and Lucent merged in November 2006, the resulting company has struggled. "Alcatel is a classic example of M&A heartburn," said Piers Hillier, head of European equities at WestLB Mellon Asset Management. "Two poor businesses put together do not make a good one." Ericsson, Alcatel-Lucent's biggest rival, has been gaining market share and said this week that third quarter sales will be "strong." Alcatel-Lucent's ADRs fell 8.8% to $9.16 Thursday.

Sources: TheStreet.com, Bloomburg, Wall Street Journal
Commentary: Ikanos Picks Up Alcatel's Check • $1.53 Billion Judgment Against Microsoft Overturned
Stocks/ETFs to watch: ALU, ERIC. Competitors: CSCO, NT. ETFs: BDH, IGN
Earnings call transcript: Alcatel-Lucent Q2 2007

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