May 5 (Bloomberg) -- Alcatel-Lucent SA, the world’s largest maker of fixed-line networks, said its first-quarter loss more than doubled 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, marking the 10th straight quarterly deficit. It was wider than the 270.9 million-euro median loss prediction, according to 10 analysts’ estimates compiled by Bloomberg. Revenue fell 6.9 percent to 3.6 billion euros, Paris-based Alcatel-Lucent said in a statement.

This “will be a year of transition,” Chief Executive Officer Ben Verwaayen said on a conference call today. “Our guidance for the year remains unchanged and we are taking appropriate actions.”

Alcatel-Lucent reiterated its goal of a break-even adjusted operating profit this year and net income in the second half of 2010. Verwaayen, who has been CEO since September, started a plan in December to slash 2 billion euros of expenses over two years, bringing job cuts to 17,500 since Alcatel SA bought Lucent Technologies Inc. in 2006. Alcatel-Lucent has lost about 8.5 billion euros since the merger.

Alcatel-Lucent rose 0.1 percent to 1.96 euros in Paris. The company’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.

Workforce Reductions

The company has cut 290 managerial positions this year and reduced the number of contractors by 770 as part of the plan unveiled by Verwaayen in December.

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 today. 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.

‘More Conservative’

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.

“Clients are more conservative, they’re making use of the equipment they already have,” Verwaayen said on the call. He said the company is seeing stronger orders in North America and the Asia Pacific region.

Alcatel-Lucent aims to achieve net income in the second half of 2010 and for the full year in 2011, Paul Tufano, hired in November as chief financial officer, reiterated today.

Technology Shift

Verwaayen said Alcatel-Lucent has no plans to leave the business of making wireless-communications equipment.

The company suffered as the wireless-network market shifted away from the older version of code division multiple access, or CDMA, a standard Alcatel-Lucent dominated, toward the global system for mobile communications, or GSM. CDMA and GSM are so- called second-generation technologies.

“We are winning massive contracts with the transition from 2G to 3G in China,” Verwaayen said.

The company will focus its research and development on optical, Internet protocol, broadband and applications areas, while reducing spending on older technologies, he said. Alcatel- Lucent is cutting manufacturing, supply chain and procurement costs, and focusing on improving the product mix.

The company will spend about 60 percent of its research and development budget on next-generation systems this year, up from about 40 percent in 2008, Verwaayen said at a press conference in Paris today.

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

To contact the reporter on this story: Vidya Root in Paris at vroot@bloomberg.net

Last Updated: May 5, 2009 11:49 EDT