Alcatel shares plunge after outlook cut

Shares of Alcatel-Lucent dived nearly 9% on Thursday after the Paris-based telecommunications equipment giant slashed its full-year revenue growth forecast and said it expected third-quarter operating profit to be “around break-even.”

In a statement, Alcatel-Lucent said it expected 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.

Alcatel-Lucent said the revision reflected recent discussions with 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.

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

U.S.-traded shares of Alcatel-Lucent tumbled 88 cents, or 8.8%, to $9.16, their lowest closing price since 2002. The stock has plummeted nearly 36% this year.

The company was formed by the 2006 merger of Alcatel and Lucent Technologies.

Chief Executive Patricia Russo said in February that plans to cut 12,500 jobs would help shave $2.36 billion in annual costs in three years. But write-downs from job cuts also have dented earnings in the near term.

What’s more, sales fell 3.7% in the second quarter, hurt by lower demand for older mobile networks in emerging markets and phone gear including switches.

“Much of Alcatel-Lucent’s problems are self-inflicted,” said Per Lindberg, an analyst at Dresdner Bank in London, who rates Alcatel-Lucent “hold.” “This is the merger of shared dilemmas. Neither Alcatel nor Lucent could compete on its own.”

Espen Furnes, who helps manage $7.1 billion at Storebrand Asset Management in Oslo, said that Alcatel management “massively underestimated the problems Lucent was struggling with. At least some of the reason behind the profit warning is company-specific and not due to any weakness in the underlying markets.”

Standard & Poor’s cut its outlook for Alcatel-Lucent’s long-term credit rating of BB-minus to “stable” from “positive” after Thursday’s announcement.