Alcatel-Lucent posts quarterly loss

PARIS -- Telecoms equipment maker Alcatel-Lucent produced a bigger-than-expected quarterly loss on Tuesday as merger costs and pricing pressures took their toll, sending its shares down more than 12 percent on the New York Stock Exchange.

Shares closed at $11.60, down $1.66.

The company, created in December by the takeover of U.S.-based Lucent Technologies Inc. by Alcatel of France, has been struggling to win the confidence of customers spooked by uncertainty over product integration and future technology choices.

Problems surrounding the complex transatlantic merger emerged as early as January, when the group issued a profit warning, and resurfaced in April with a sales warning.

"In the early days of our merger, we have had some attacks on our customer base," said Alcatel-Lucent Chief Executive Patricia Russo in a conference call. "But we have not yet seen the all the benefits of the product rationalization work which affects the margins as well."

Its operations in Naperville and Lisle, which focus on wireless and convergence research and development, have dwindled over the years to 4,200 workers. But the company said it has no plans to close those operations.

Alcatel-Lucent's wireless sales fell 11 percent in the second quarter while fixed-line revenues rose 3 percent.

Alcatel-Lucent is the market leader for fixed-line network equipment and associated services, but lags Ericsson in wireless gear.

Cut-throat competition from Ericsson as well as Nokia Siemens Networks, and Asian rivals has forced Alcatel-Lucent to sell wireless network products at relatively low prices, putting pressure on margins.

"It looks as if some of the savings that are made from cost-cutting are being absorbed by price pressures (particularly in the mobile equipment sector) which are worse than expected and hurting margins," said Richard Windsor, analyst at Nomura.

The company generated a second-quarter adjusted operating loss of 19 million euros, well below expectations of a profit of 67.8 million euros in a Reuters poll.

At the net level, it produced a loss of 336 million euros, or $459.3 million, against a profit of 302 million euros the previous year and forecasts of a 147.1 million loss.