Alcatel-Lucent SA, Frances largest telecommunications equipment supplier, cut its profit forecast as economic uncertainty in Europe prompted customers to hold back orders. The shares slumped by 17 per cent in Paris trading, the biggest decline since 2002. The full-year adjusted operating margin will be about four per cent, one per centage point less than an earlier projection, Alcatel-Lucent said. Third-quarter sales fell by 6.8 per cent to 3.8bn ($5.2bn), missing the four billion-euro average analyst estimate. Europe is "a hesitant market, and the uncertainties are bigger than we anticipated before," Chief Executive Officer, Ben Verwaayen, said on a conference call. Bloomberg quoted him as saying that the forecast reduction was necessary for the Paris-based company "given the uncertainties affecting Europe, and the fact that we see fourth-quarter revenue in Europe weaker than we planned." Alcatel-Lucent said on Monday that it planned to seek additional savings of about 500m in 2012 as it tried to keep down costs of sales and project implementation. Verwaayen is nearing the end of a three-year turnaround plan for Alcatel-Lucent, which lost almost 10bn in the three-and-a-half years following its creation through the 2006 takeover by Alcatel SA of Lucent Technologies. The companys shares by 34 cents to 1.67. Third-quarter net income was 194m, beating the 57.2m average estimates of 16 analysts compiled by Bloomberg. Alcatel-Lucent returned to profit in the second quarter with 43m in net income. To rebuild the company, Verwaayen has sold assets including a stake in Thales, the aerospace manufacturer, and the Genesys call-centre software unit, which Permira Advisers LLP agreed last month to acquire for $1.5bn. Those proceeds will be used for debt repayments and "general working capital," Chief Financial Officer Paul Tufano said on Friday. Leaders of the Group of 20 nations gathered in Cannes on Sunday urged European governments to implement a rapid solution to the continents two-year financial crisis after Greek prime minister, George Papandreou, promisedand then scrappeda referendum on continued membership in the euro. 'The European Central Bank announced a surprise quarter-point cut in the benchmark interest rate as President Mario Draghi warned of a potential regional recession. Third-quarter revenue from Europe declined 12 per cent to 1.1 billion euros, Alcatel-Lucent said. Consolidation among mobile network operators, such as the 2009 merger of Deutsche Telekom AG and France Telecom SAs United Kingdom units, may restrain network spending further by eliminating duplication even as data consumption surges thanks to devices such as Apple Incorporateds iPhone. Sales from North America, Alcatels biggest market, slipped 0.3 per cent, while Asia slumped 19 per cent. The company reported a negative free cash flow of 436 million euros, a situation Tufano called "unacceptable" and pledged to rectify next year. In its networking business, Alcatel-Lucent faces intensifying competition from Chinas Huawei Technologies Company and ZTE Corporation, along with European rivals including Ericsson AB. Ericsson, the worlds largest supplier of networking gear, is also shedding assets and agreed last month to sell its stake in handset joint-venture Sony Ericsson to its Japanese partner for $1.5bn.
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