ALU profit warning, again

It is another dark period for ALU, announcing a new profit warning (the third in the year) and sending down annual revenue forecast. First facts: ALU expects now flat 2007 revenue (vs mid-single digits growth) and admitted that profitability is likely to be negatively impacted. Alcatel said it is impacted by change on US carriers ' capital spending and particularly in the CDMA market (Alcatel in #1 vendor in the market). As a results the share went down by 10% in the week and over 40% from the beginning of the year.

We are far away from the rosy picture send 18 months ago when the two giants Alcatel and Lucent decided to merge. The merits of the merger strategy and of the managing team have yet to be proved. Some analysts already said that the merger is a fiasco, and investors are losing patience, threatened that the situation comes worse. Typically, the ALU management did not recognize any problem in execution (problems are competition, price erosion, market conditions, ...), but why competitors (except NSN) did not have the same problems?

Solutions given by most of analysts are around another headcount cut (up to 30,000 ? from current 12,000 plan), business re-alignment with even sale of some activities (3G ?), management shake-up (Russo specifically). Depending upon results announced in next October, views between investors and financial analysts may converge. Let see!