Alcatel-Lucent SA, the world's largest supplier of fixed-line telecommunications networks, may report a narrower second-quarter loss compared with the year- earlier period, when it wrote down wireless assets.

The net loss may be 135 million euros ($212 million), or 6 cents a share, compared with a shortfall of 586 million euros, or 26 cents, a year earlier, based on the median estimate of eight analysts surveyed by Bloomberg News. Paris-based Alcatel-Lucent posted a loss in all five of the full quarters since Alcatel SA bought Lucent Technologies Inc. in November 2006.

The merger and a plan to cut 16,500 jobs have failed to make up for falling prices and orders. Chief Executive Officer Patricia Russo hasn't said when she expects a return to profit, and Alcatel-Lucent and Ericsson AB, the biggest maker of wireless equipment, both say the equipment market will stagnate this year.

``We expect cautionary comments about the spending environment,'' Thomas Langer, an analyst at WestLB in Dusseldorf, wrote in a preview note. ``Management might be inclined to lower the top-line guidance a bit to take account of the most recent dollar decline against the euro.''

Stephane Lapeyrade, a spokesman for Alcatel-Lucent, declined to comment. The company reports earnings before the stock market opens tomorrow.

In April, Alcatel-Lucent forecast 2008 sales will fall 2 percent to 5 percent because of the dollar's drop against the euro and possible spending delays by some clients. The dollar slipped 14 percent against the euro in the year to June 30.

Share Slump

Alcatel and Lucent, unable to revive sales or their share prices since the technology bubble burst in 2000, combined to fight competition from China's Huawei Technologies Co. and Sweden's Ericsson. Alcatel-Lucent shares are down 61 percent since the merger as losses stacked up, erasing 14.4 billion euros of market value.

This year, Alcatel-Lucent shares have fallen 20 percent, while Stockholm-based Ericsson lost 12 percent.

Alcatel-Lucent last year cut 6,700 jobs, reducing the number of employees to 77,400 at the end of December. The company raised its job-cut target in October to 16,500 in response to falling sales. Cash costs for restructuring will be 1.7 billion euros to 1.9 billion euros through the end of 2009, the company has said.

Last year's second-quarter loss included 250 million euros to amortize the Lucent purchase and a 298 million-euro writedown of the unit that provided wireless networks based on the third- generation W-CDMA technology.

Lower Demand

In April, the company reported a first-quarter loss on costs to cut jobs, and said it suffered from lower demand for older Internet-access, wireless and switching equipment.

On July 22, Ericsson said second-quarter profit fell 70 percent. The company reiterated that demand for networks will remain ``flattish'' this year. Ericsson is slashing 4,000 jobs.

Alcatel-Lucent has struggled as customers upgrade their networks. It's the biggest maker of gear for code-division multiple access, a wireless technology used by Verizon Communications Inc. and China Unicom Ltd.

Operators are investing in networks that use the global system for mobile communications, or GSM, or spending on a newer technology, W-CDMA, to provide third-generation mobile services. Alcatel-Lucent ranks third in both GSM and W-CDMA.

Alcatel-Lucent revised its 2008 sales outlook in April to a decline from an increase, and Russo said the ``big-deal issue'' is the dollar, with the company getting more than half of its sales in dollars or related currencies.

Sales Decline Forecast

Second-quarter sales may have dropped 5.6 percent to 4.09 billion euros, based on 14 estimates.

``Alcatel-Lucent management is likely to maintain its cautious tone on the networks market,'' analysts Vincent Maulay and Frederic Doussard at Oddo Securities in Paris said in a note to investors. ``The macroeconomic context could prompt a wait- and-see approach in terms of investments.''

Excluding accounting changes from the merger, the company may report a loss of 5 million euros, based on 11 estimates.

Alcatel-Lucent's carrier business, which provides networks to telephone operators, may return to profit on demand for fiber- optic connections by AT&T Inc. and Verizon, according to the estimates. The division may post an adjusted operating profit of 24 million euros, compared with a year-earlier loss of 73 million euros.

Source:Bloomberg