Alcatel-Lucent's Net Loss Widens

By MAX COLCHESTER

Telecommunications-equipment maker Alcatel-Lucent SA posted a net loss in the first quarter, saying Thursday that a shortage of electronic components meant it couldn't fulfill some orders.

The Paris-based company, which has recorded a quarterly profit only twice since its creation in 2006, said its net loss widened to €515 million ($660.3 million) in the three months ended March 31, compared with a loss of €402 million a year earlier.

Revenue fell 9.8% to €3.25 billion from €3.6 billion, as the company lacked key components, such as microchips, to manufacture some of its products. Revenue was down 18% from the fourth quarter of 2009.

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CEO Ben Verwaayen expects Alcatel-Lucent to post a second-half profit.

"In the first quarter, we failed to take the demand and translate it into sales," Alcatel-Lucent Chief Executive Ben Verwaayen said in an interview.

Mr. Verwaayen said the company was in talks with parts makers to address the supply issue. The Alcatel-Lucent CEO said the company has signed a series of large orders, notably in the U.S., and forecast that the company will make a profit in the second half of 2010. The company is set to turn its first-ever full-year profit in 2011, he added.

Mr. Verwaayen said he was confident that the popularity of data-hungry devices, such as smartphones, will force telecommunications operators to invest in improving their networks in the coming years. As proof of this market trend, he cited an order which Alcatel-Lucent booked in February to supply AT&T Inc. with advanced wireless-network equipment.

This boom in demand has yet to be felt across the world.

Alcatel-Lucent's first-quarter loss underscore the challenges that European telecommunication equipment makers face as Asian rivals, such as China's Huawei Technologies Co. Ltd and ZTE Corp., are now able to provide similar products at much cheaper prices.

Alcatel-Lucent's revenue fell 18% in the Asia-Pacific region to €531 million in the quarter.

Analysts said Alcatel-Lucent finds itself in a delicate position because the technological lead it had over competitors has been eroded. "There is no easy solution to the problem," said Vincent Rech, an analyst at Société Générale. "Alcatel-Lucent must either develop a ground breaking technology or eventually merge with a competitor."

Shares of Alcatel-Lucent fell 6.24% to €2.12, in contrast with a rising Paris stock market.