Sept. 13 (Bloomberg) -- Alcatel-Lucent SA, the world's biggest maker of telecommunications equipment, fell to a four- year low in Paris trading after cutting its 2007 sales forecast on fewer-than-anticipated orders in North America.

The Paris-based company's stock slid 8.7 percent to 6.62 euros, the lowest since 2003. Sales growth may stall in 2007, third-quarter profit excluding items will be ``around break- even'' and margins will shrink, Alcatel-Lucent said today.

A decline in orders for mobile-phone networks, falling prices and costs to cut 12,500 jobs have wiped out earnings at Alcatel-Lucent. Alcatel SA and Murray Hill, New Jersey-based Lucent Technologies Inc., unable to revive sales since the technology bubble burst in 2000, combined in November last year. The stock has dropped 35 percent since the merger, erasing $11.2 billion, close to the value of the takeover.

``Two poor businesses put together do not make a good one,'' said Piers Hillier, head of European equities at WestLB Mellon Asset Management U.K. in London, which manages $35 billion. ``Alcatel is a classic example of M&A heartburn.''

Alcatel-Lucent's wireless customers in North America include Verizon Communications Inc., which signed a three-year contract worth about $6 billion in March, and Mexico's Grupo Iusacell SA. Ericsson AB, the world's biggest maker of wireless networks, said in July that sales in North America won't rise this year, after first-half revenue dropped 31 percent in the region.

`Shared Dilemmas'

Alcatel-Lucent Chief Executive Officer Patricia Russo said in February that plans to cut 12,500 jobs will help shave 1.7 billion euros ($2.36 billion) in annual costs in three years. Alcatel-Lucent reported a second straight loss in July because of writedowns and costs for job cuts.

Sales fell 3.7 percent in the second quarter and 12 percent the previous period, hurt by lower demand for older mobile networks in emerging markets and phone gear including switches.

Alcatel bought Lucent for $11.6 billion on Nov. 30.

``Much of Alcatel-Lucent's problems are self-inflicted,'' said Per Lindberg, an analyst at Dresdner Bank AG in London, who rates Alcatel-Lucent ``hold.'' ``This is the merger of shared dilemmas. Neither Alcatel nor Lucent could compete on its own.''

The company's shares fell 63 cents to 6.62 euros in Paris, after dropping as much as 14 percent earlier. Alcatel-Lucent shares are the worst performers in France's benchmark CAC 40 Index this year.

Sales Outlook

Revenue this year will be ``flat or slightly up,'' Beaufret said. The company earlier forecast growth in the ``mid-single digits,'' which Russo defined as at least in line with the 4 percent to 6 percent increase in spending by voice and data carriers. Today's lowered forecast was the result of recent talks with wireless companies in North America, the company said.

``The problems in North America aren't large problems,'' Chief Financial Officer Jean-Pascal Beaufret said in a telephone interview. ``We have to put things into context: every year the operators spend tens of billions on capex; what we're talking about is a small fraction of their spending.''

Revenue in the third quarter will grow slightly, excluding currency fluctuations, and fourth-quarter sales are expected to ``ramp up strongly'' from the previous period, the company said.

Alcatel-Lucent said it has seen ``a change in capital spending'' at North American customers in 2007, compared with what it had anticipated. This means volumes have failed to make up for the ``ongoing pricing pressures.''

Rating Outlook

``Alcatel management massively underestimated the problems Lucent was struggling with,'' said Espen Furnes, who helps manage the equivalent of $7.1 billion at Storebrand Asset Management in Oslo. ``At least some of the reason behind the profit warning is company-specific and not due to any weakness in the underlying markets.''

Standard & Poor's cut its outlook for Alcatel-Lucent's long- term credit rating of BB-, three steps below investment grade, to ``stable'' from ``positive'' after today's announcement.

``That we underestimated the problems at Lucent is not the way to describe it,'' Beaufret said. ``That we expected a market at a higher level, that's true.''

Alcatel-Lucent will take ``precise and focused'' measures to address problem regions, Beaufret said. He said it's too early to say whether more jobs will be cut, but ``we can't exclude that.''

French unions yesterday agreed to plans to cut 1,468 jobs in France, ending protests that lasted from February to July and included the disruption of Alcatel-Lucent's annual meeting.

``The merger is a fiasco,'' said Ion-Marc Valahu, head of trading at Amas Bank in Geneva. ``To tell the truth, we all believed in it, it seemed a good operation. On the management side, the deal execution hasn't followed through.''

`Worst Combination'

Alcatel and Lucent, unable to revive sales or their share prices since the technology bubble burst in 2000, combined last year to fight competition from China's Huawei Technologies Co. and Sweden's Ericsson.

``This is the worst combination of mergers,'' said Lindberg at Dresdner Bank. ``These companies were never made for each other. It's a cultural mismatch.''

Alcatel-Lucent's comments contrast with Ericsson, the world's largest maker of wireless networks, which said this week demand will be ``strong'' in the third quarter and that it will gain business in the second half.

Stockholm-based Ericsson toned down its 2007 market outlook in February, attributing it to the weakness of rivals such as Alcatel-Lucent and Nokia Siemens Networks. Nokia Oyj and Siemens AG merged their network equipment units in April this year.

Ericsson's biggest market is China, accounting for 10 percent of revenue in the quarter, followed by India, which brings in 8 percent of sales.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

Last Updated: September 13, 2007 12:35 EDT