Alcatel-Lucent SA, the world’s largest maker of fixed-line networks, said its first-quarter loss widened as the global economic slump eroded demand for telecommunications equipment.

The net loss swelled to 402 million euros ($537.5 million) from 181 million euros a year earlier, making it Alcatel- Lucent’s 10th straight quarterly deficit, according to a statement today. That missed the median loss of 270.9 million euros, according to 10 analysts’ estimates compiled by Bloomberg. Revenue fell 6.9 percent to 3.6 billion euros. Alcatel-Lucent reiterated its goal of a break-even adjusted operating profit this year.

“2009 will be a year of transition,” Chief Executive Officer Ben Verwaayen said in the statement. “Our guidance for the year remains unchanged and we are taking appropriate actions.”

Verwaayen, who has been in charge since September, is reducing costs to end losses as demand falters. In December, Verwaayen said he would slash 2 billion euros of expenses over two years, including 1,000 more managerial positions, bringing job cuts to 17,500 since Alcatel SA bought Lucent Technologies Inc. in 2006. Paris-based Alcatel-Lucent has lost about 8 billion euros since the merger.

Alcatel-Lucent’s market value has tumbled more than 18 billion euros to 4.5 billion euros since the November 2006 completion of the merger, which was aimed at fighting off competitors including Ericsson AB and Huawei Technologies Co. The shares have rise 28 percent this year.

Shrinking Market

Competitor Ericsson, the world’s largest maker of wireless phone networks, last week said first-quarter profit declined 35 percent on costs to eliminate jobs. The Stockholm-based company’s CEO, Carl-Henric Svanberg, said customers in some markets postponed spending and that some operators are “more cautious” with long-term investments.

The telecommunications equipment market will slump 8 percent to 12 percent in 2009 at constant exchange rates, Alcatel-Lucent said. The company suffered from writedowns in the wireless-equipment business, restructuring costs, spending cuts by clients including Sprint Nextel Corp. and competition from Ericsson and Huawei, China’s biggest phone-network equipment maker.

Deutsche Telekom AG, Europe’s biggest phone company, said last month it is freezing 1 billion euros of capital expenditure as customers canceled fixed-line phones. TeliaSonera AB, Sweden’s largest phone company, said it may cut spending, while Telefonica SA and Vodafone Group Plc said in March they will share wireless network sites to save money.

Margin Goal

In December, Alcatel-Lucent said it aims for a gross margin in the mid-30s and an operating margin in the “mid-single digits” in 2010 by reducing costs by 1 billion euros in each of the next two years.

The company will post an adjusted operating profit in 2010, although it’s too soon to say when it will report net income, said Paul Tufano, hired in November as chief financial officer.

The company will focus its research and development on optical, Internet protocol, broadband and applications areas, while reducing spending on older technologies, such as code division multiple access, or CDMA, Verwaayen said in December. Alcatel-Lucent is cutting manufacturing, supply chain and procurement costs, and focusing on improving the product mix.

On Sept. 2, Alcatel-Lucent’s board named Verwaayen, previously head of BT Group Plc, as CEO and appointed Philippe Camus, co-managing partner of Lagardere SCA, as chairman. They replaced former Lucent CEO Patricia Russo and Alcatel Chairman Serge Tchuruk, the architects of the 2006 merger.

Verwaayen said Alcatel-Lucent had no plans to leave the business of making wireless-communications equipment. The company suffered as the wireless-network market shifted away from CDMA, a standard Alcatel-Lucent dominated, toward the global system for mobile communications, or GSM.

Source:Bloomberg