Alcatel-Lucent Q3 loss widens to $269 million

PARIS - Telecommunications equipment maker Alcatel-Lucent SA saw its net loss widen in the third quarter as European phone companies, its key customers, cut back on spending.

The company said Friday that losses reached euro182 million ($269 million) in the period. That was more than the euro40 million it lost a year earlier and worse than analysts had forecast.

Shares in Alcatel-Lucent fell 5.8 percent in morning trading to euro2.71.

Headquartered in Paris and with North American operations based in Murray Hill, New Jersey, Alcatel-Lucent is one of the world's biggest suppliers of networking gear and services for wireless and fixed telecommunications operators.

The company said it still expects to be close to break even at an adjusted operating level this year, despite having accumulated euro327 million in losses by that measure through the first three quarters of the year.

Revenue fell 9.3 percent in the third quarter to euro3.7 billion. The drop was driven by double-digit declines in older technologies such as 2G wireless, as operators have slashed invesment in response to the global economic slowdown.

Earlier this week France Telecom SA, one of Alcatel-Lucent's biggest customers, said it had sharply cut back its capital spending in a bid to conserve cash and focus on reducing its debt.

Alcatel-Lucent's third quarter performance was on par with the disappointing earnings reported earlier this month by its main European rivals, LM Ericsson AB of Sweden and Nokia Corp. of Finland.

In a conference call with reporters, Chief Executive Ben Verwaayen highlighted Alcatel-Lucent's improved operating profitability in the quarter, noting the 0.4 percentage point improvement in the company's adjusted gross operating margin versus a year earlier. And that was despite the lower revenue.

He credited Alcatel-Lucent's ongoing cost-reduction efforts for the improved operating margin.

The CEO said Alcatel-Lucent has achieved 80 percent of an intended euro750 million cost reduction plan targeted for this year, as the company seeks to shore up its margins amid falling sales.

Alcatel-Lucent has been struggling for years to justify the 2006 trans-Atlantic merger that created it with the aim of becoming a global telecommunications leader. Total losses generated by the company since then now top euro9 billion, and Verwaayen has warned investors not to expecct a full-year profit until 2011.

Verwaayen is an outsider brought in by Alcatel-Lucent's board to attempt to turn the company around after the merger's original architects, Serge Tchuruk of Alcatel and Patricia Russo of Lucent Technologies, were unable to do so.

He has sought to put aside questions over the merger's original justification, saying he's focused on the future not the past.

The company's stock has soared nearly 90 percent so far this year on speculation that it is a target in the next round of industry consolidation. Verwaayen said last month that the company wasn't in any merger and acquisition talks.

Verwaayen also reiterated his outlook for the global telecoms equipment market to contract between 8 percent and 12 percent this year, and to return to slight growth in 2010.

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