TMCNet:  Shares in Alcatel-Lucent tumble on profit warning

[September 13, 2007]

Shares in Alcatel-Lucent tumble on profit warning

(Associated Press WorldStream Via Thomson Dialog NewsEdge) PARIS_Shares in telecommunications equipment maker Alcatel-Lucent SA fell Thursday to their lowest level after the company slashed its forecast for full-year revenue growth in its third profit warning since the start of the year


The company also said it expects third-quarter operating profit to be "around break-even."

In early morning trading in Paris, Alcatel-Lucent shares plunged 11 percent to 6.43 (US$8.94) _ the biggest faller in France's benchmark CAC-40 index.

Earlier, the stock fell to as low as 6.32 (US$8.78).

In a statement, Alcatel-Lucent said it now expects revenue growth in 2007 to be flat to slightly up at a constant exchange rate. The company had previously estimated its full-year revenue would grow in the mid-single digit percentage range at a constant exchange rate.

On Jan. 23, Alcatel-Lucent warned investors its fourth quarter 2006 operating profit would be affected by lower sales in North America. Again, on Feb. 9, Alcatel-Lucent warned investors it expected a revenue decline in the first quarter 2007 due to challenging market conditions in North America and added on April 24, it expected a first-quarter operating loss of 260 million (US$361 million).

Alcatel-Lucent said the latest downward revision is due to its most recent discussions with some of its wireless customers in North America.

"Alcatel-Lucent is now seeing a change in capital spending with those customers in 2007, compared to what it had anticipated," the company said in its statement.

It also said it is "not seeing the projected volume changes that would have mitigated the ongoing pricing pressures it is experiencing."

Alcatel-Lucent's current situation and latest profit warning is due to the fact the company has not been able to put its restructuring plan into action in France, because of the country's presidential election earlier this year and recent departures by senior management which prevented the group from cutting costs, HPC research head Andre Chassagnol said.

The restructuring plan was approved by unions only days ago, Chassagnol also noted.

"Alcatel-Lucent is faced with a drop in product prices but the costs remained the same," said Chassagnol. "It is crucial for the group to cut its costs or else it could go bankrupt."

Nomura analyst Richard Windsor said he had long said Alcatel-Lucent's full-year revenue target was "unrealistic."

"What's disappointing is the operating profit," said Windsor, who has a neutral rating on Alcatel-Lucent stock.

Alcatel-Lucent said it now sees its revenue for the third quarter of 2007 growing slightly compared to the second quarter of this year at a constant exchange rate.

For the fourth quarter, Alcatel-Lucent still expects its revenue "to ramp-up strongly over the third quarter."

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