Alcatel-Lucent on Friday reported its biggest quarterly loss since its creation in 2006, scrapped its dividend and substantially wrote down the value of the Lucent Technologies wireless network assets.

Patricia Russo, chief executive, warned that the outlook for the group, the world’s largest telecoms equipment manufacturer, remained uncertain, that it would have an operating loss in the first quarter and forecast adjusted operating margins of between 2.5 per cent and 5 per cent for 2008.

In the latest quarter Alcatel-Lucent reported a loss of €2.58bn ($3.74bn), up from €615m a year earlier. Sales were better than expected, up 18 per cent at €5.23bn. Excluding €2.52bn of writedowns, the loss was €48m.

The losses and the asset write-downs underscore the scale of the problems facing the Paris-based company and will fuel the continuing doubts over the wisdom of the merger. Alcatel acquired Lucent Technologies in December 2006 in what was then called “a marriage of equals”.

Alcatel-Lucent since announced plans to cut a total of 16,500 jobs, including 6,700 which went last year, bringing the number of employees at year-end to 77,400. Nevertheless, the cuts have failed to compensate for price competition and falling orders.

Alcatel-Lucent’s market value has plunged €13.5bn since the merger, dropping below the book value of shareholder funds, and forcing the group to undertake asset impairment tests. Alcatel-Lucent said it had taken an asset impairment charge of €2.94bn, including about €2bn to cover the reduced value of Lucent’s CDMA (code-division multiple access) network unit.

Lucent was the market leader in CDMA technology. “That is a mature market that in general we think will continue to decline as the years go forward,” Ms Russo said at a news conference.

Despite the asset write-downs, Ms Russo rejected the view that the charges showed Alcatel had overpaid for Lucent. She added she was not considering another restructuring, in spite of worsening market conditions. The company has forecast that job cuts and other cost savings will reduce annual costs by €1.7bn after three years, and produce savings of €600m this year.

“This was the largest merger in our industry and it proved to be more difficult than expected,” she said.

Source:FT.com