Alcatel-Lucent's rosy third-quarter profits were overshadowed this morning by a grim fourth-quarter forecast which warned sales could take a hit from the European financial crisis.
For the remainder of this year, the company expects "weaker revenues there than initially planned in the fourth quarter," CEO Ben Verwaayen said in a statement, citing "market uncertainties" and "selective spending from our customers, especially in Europe."
"We are not at a level we are satisfied with," Verwaayen said. The company has struggled to post a profit since it was formed by the merger of Alcatel and Lucent in 2006.
The uncertain economic environment prompted Alcatel-Lucent to cut its fourth-quarter forecast. It is now aiming for an adjusted operating margin of about 4 percent, down from its original target of 5 percent.
The infrastructure vendor said sales dipped nearly 7 percent in the third quarter to Euro 3.8 billion, or $5.25 billion. Profits spiked to $268 million, from $34.5 million last year, but the increase was mainly driven by a favorable tax gain of $210 million.
The decline in sales was attributed to weakening demand in Europe and the Asia Pacific region, which was offset by a slight increase in other international markets. The company's networks division saw a 7 percent drop in sales on a drop-off in its wireline and optics units.
Verwaayen said Alcatel-Lucent plans to cut costs, particularly in Europe. The reductions will reduce fixed costs by $276 million next year and $415 million in 2013.