French-US telecom equipment maker Alcatel-Lucent issued its second profit-warning of the year Thursday, sparking a sharp fall in the group’s share price despite management assurances the merger of the two groups would prove fruitful.
Alcatel-Lucent shares plunged 8.69 percent on the day to close at 6.62 euros. The share has now lost 40 percent of its value since the start of the year.
The group, formed in late 2006 in the merger of Alcatel of France and Lucent of the United States, said it foresaw full-year sales growth as being “flat to slightly up,” having earlier said revenue should grow about 5.0 percent in 2007.
It added that after consulting North American mobile operator clients on their spending plans, it had determined that third-quarter sales growth would likely be weak and would hurt profitability.
“The change in revenue mix is expected to negatively impact the profitability of the company, especially in the current quarter,” it said.
Third quarter 2007 sales are expected to grow “slightly” compared to the second quarter at a constant euro-dollar rate before they “ramp up strongly” in the fourth quarter.
The group in January, just several weeks after the merger, issued a first warning on its financial results.
Alcatel-Lucent chief executive Patricia Russo attributed the company’s current problems to lower-than-expected investment by North American mobile phone operators, as well as to increased up competition in the worldwide mobile phone market.
The company nonetheless earlier this year signed a three-year, 6.0-billion-dollar (4.3-billion-euro) contract with US mobile operator Verizon. Alcatel-Lucent is currently the largest supplier of telecom equipment in the North American mobile phone sector, where it has a market share of 55 percent.
Alcatel-Lucent said it was increasing the pace of a restructuring programme aimed at cutting 12,500 jobs worldwide and saving more than 1.7 billion euros over three years.
Russo would not rule out the possibility of additional job cuts in certain regions.
She also voiced confidence in the overhaul and in the merger in general.
“We have to be careful not to let one piece of news or an another piece of news say that the merger does not make sense,” she told AFP.
“We are nine months into a three-year integration plan. It’s not easy, it’s complex.
“We are making good progress. We are having a difficult year and the important thing is to stay focused on executing the things we know we can execute and make adjustments.”