Alcatel-Lucent Shares Sink on Profit Warning

By FOXBusiness

Alcatel-Lucent (NYSE:ALU) warned on Tuesday that it expects to post a second-quarter operating loss and miss a key performance goal as demand continues to slump in Europe and fierce competition and pricey contracts weigh heavily on its bottom line.

The French telecom-equipment maker said it will likely post an adjusted quarterly operating loss of 40 million euros ($49 million) on revenues above 3.5 billion euros ($4.3 billion). That revenue figure is poised to miss the Street's view of $4.7 billion when the company reports on July 26.

Continue Reading Below

The company's shares traded in New York skidded 18% on the news, marking a 78% year-to-year plunge.

Alcatel-Lucent said the figures reflect “good sequential growth in sales with all geographies and divisions growing,” but a slower-than-expected improvement in business mix.

"In light of year-to-date performance and the difficult macroeconomic environment, Alcatel-Lucent won't achieve its adjusted operating margin guidance for 2012," the company said in a statement. The company had earlier predicted it would top last year’s margin of 3.9%. Operating margins are a key profitability metric.

The Parisian company continues to cut expenses and says it has decreased fixed costs by 100 million euros ($123 million) compared with the year-earlier period. It expects the second half of the year to be better than the first.

However, competition from Asian rivals like Huawei Technologies and ZTE Corp. that offer cheaper products have weighed heavily on Alcatel-Lucent’s operations.

While Alcatel-Lucent has undergone major restructuring changes over the last five years, it continues to bleed money on expensive contracts, such as the deployment of a 4G network for Sprint (NYSE:S).