The Alcatel-Lucent telecom equipment giant revealed a huge loss on Tuesday and the shock departures of its two founders, as Asian competition adds to the strains of rapid change in the sector.

The group, formed only 20 months ago when French Alcatel acquired Lucent Technologies of the United States, reported a second-quarter loss of 1.1 billion euros (1.7 billion dollars).

The shock departure of the two high-profile personalities who arranged the trans-Atlantic marriage, Patricia Russo of the United States and Frenchman Serge Tchurk, is a measure of the problems in this vast group and also of disruptive change from technology and new competitors in the sector.

The group signalled that changes in its governance might be on the way, and the price of its shares rose by 5.48 percent to 4.04 euros as the overall French CAC 40 index fell by 1.21 percent.

Tchuruk, who will leave office on October 1, said: "The merger phase is now behind us.

"The time has come for this company to acquire an identity which is its own, independent from those of the two original companies."

The company said Russo had decided to resign by the end of the year but that she "will continue to direct the group to ensure the transition".

Russo herself explained that "a new general board and a recomposed supervisory board will offer a new and independent perspective."

This would "enable the group to accelerate its growth and development in a rapidly changing market."

The latest loss was the sixth quarterly loss in a row and came amid a global restructuring intended to shed 16,500 jobs across the group's global activities by 2009.

The group, which has issued several profits warnings and launched a number of restructuring operations, made a net loss in 2007 of 3.5 billion euros after a loss of 176 million euros in 2006.

The latest loss arose largely from a goodwill asset writedown of 810 million euros for the CDMA standard of mobile telephones, mainly in the US market, because one big client in North America had cut investment sharply.

Adjusted to exclude this writedown, the net quarterly loss was 222 million euros.

Sales in the quarter fell by 5.2 percent to 4.101 billion euros by comparison with the equivalent figure last year. But from the first quarter figure they rose by 6.1 percent, exceeding the group's forecast of 4.0-6.0 percent.

The loss was far bigger than expected by analysts, but the sales were in line with their estimates.

The results were also set back by exchange rate factors in a context of weakness of the dollar.

The group stood by its sales forecast for the year, signalling a decline of 2.0-5.0 percent.

The simultaneous departures of chief executive Russo and non-executive chairman Tchuruk, who engineered the tie-up, were a surprise even though there had been rumours that one or other might leave the group.

There were also rumours that that their respective styles were a factor in the company's difficulties.

Russo insisted, however, that despite the worsening second-quarter loss, about double a net loss of 586 million euros in the second quarter of last year, "our strategy is showing through progressively."

She pointed to an adjusted operating profit of 93 million euros, or 2.3 percent of sales, from a loss of 19 million euros 12 months earlier. The adjusted gross margin was 34.9 percent "in line with our overall forecast for the year," Russo said.

The board said it would "immediately begin the search for a new non-executive chairman and a new chief executive," and would also change its composition to reduce the number of its members.

Consequently, the managing director of Lucent up to January 2002, Henry Schacht, would also resign from the supervisory board.

Both companies as separate entities were hard hit by the unwinding of the Internet and the high-tech bubble.

Their problems then highlighted strategic challenges facing many other long-established telecommunications sector companies in advanced economies with the strains of rapid technological advance arising from the digital revolution and profound change through the opening of markets.

In addition redoubtable competitors in Asia, and notably China, were emerging.

The strategic response chosen by Russo, who ran Lucent Technologies from 2002 to 2006, and Tchuruk who had focused Alcatel on telecommunications equipment since taking charge in 1995, was to arrange a tie-up.

This was completed in December 2006, with Alcatel being the dominant partner.

Russo was a high-profile executive in the United States, partly because of the company she ran and partly because she was a highly successful woman in business.

Source: AFP Global Edition