Alcatel-Lucent warns of a first-quarter slip

Alcatel-Lucent today warned that its first-quarter results, to be reported in May, will be worse than expected. The equipment giant expects to report 3.9 billion euros (or about $5.3 billion) in first-quarter revenue, slightly below the average Wall Street analyst expectation and down 8% to 12% from a year earlier, depending on euro-to-dollar exchange rates.

The company attributed the decline to lower-than-expected sales of legacy wireless and core networking gear.

Alcatel-Lucent will also report an adjusted operating loss of 260 million euros, or 7% of its quarterly revenue—also worse than Wall Street was anticipating. Part of that loss is due to the company’s current investment in WCDMA wireless technology, it said in a statement issued today. “In the case of WCDMA, we are transitioning some of our customer base consistent with our going-forward portfolio. As a result, revenues were low while synergy benefits of the former Alcatel, Lucent and Nortel WCDMA businesses have not yet been fully realized. We believe these are important strategic investments to make that will pay off in the future.”

This year’s first quarter is the company’s second-ever quarter as a combined entity and the second time it has warned of lower-than-expected results. A month before its inaugural earnings report in February, it warned that fourth-quarter results would be lower than expected. At the time, the company blamed its woes on a shift in spending among large North American carriers and a competitive global wireless market. This time around, the company cited a continuation of problems in the global wireless market but didn’t mention North America in particular. In fact, the company touted the $6 billion deal with Verizon Wireless it announced last month as one of the quarter’s highlights.

In a note today, UBS Investment Research pointed out that Alcatel-Lucent’s book-to-bill ratio of 1.3 for the first quarter implies “a solid order book and resumption of growth in coming quarters.”

Integrating itself following last year’s merger, the vendor reduced its workforce by 1,900 during the first quarter, 15% of its three-year target of 12,500. UBS took this as another positive sign, indicating the company is on pace to achieve the 600 million euros in cost savings it predicted this year.

UBS reiterated its position of staying tuned to Alcatel-Lucent in the second half of this year, “when evidence of the upside in cost synergies and revenue growth should become clearer.”