The head of telecoms equipment maker Alcatel said today his company would have a tough time generating an operating profit this year, sending shares in the French firm to nearly three-year lows.
The remarks by Mr Serge Tchuruk appeared to be more cautious than comments he made as recently as late July, when the company predicted a positive operating result in 2001.
In response, investors dumped the stock back to levels not seen since Mr Tchuruk issued a shock profit warning in late 1998 that wiped 40-per cent off the stock's value in one day and did long-term damage to investor confidence in the company.
Other stocks in the sector suffered the same fate as market concerns over the telecoms industry snow-balled.
"As far as operating income goes, we hope to report a positive result this year, but the market is not helping us," Mr Tchuruk told an investor conference in Paris hosted by HSBC on Wednesday.
He said Alcatel was sticking with a forecast for stable turnover in 2001 and positive cash flow, and said he did not expect a significant rise in provisions.
At noon lcatel stock, which was already off roughly five per cent before the remarks, was quoted down 10.68 per cent at euro 15.14 amid a broad thumping of telecoms equipment makers and other tech stocks in Europe.
"This is really bad news," said one Paris dealer. "We were led to believe from comments in July that operating profit would be positive, but now Tchuruk is telling us that will be a challenge. And it's not the first time they've dropped surprisingly bad news on us."
Alcatel's British peer Marconi saw its own shares slump 18 per cent, Ericsson nearly nine per cent and Nokia and Siemens over four per cent each.
Markets are now speculating about consolidation within the telecoms sector, with rumours of an Alcatel/Marconi tie-up making the rounds in recent weeks. Mr Tchuruk today dismissed the logic of a cross-Channel merger between the two former titans.
"All those with some sense know that even if we wanted to, it would make no sense," Mr Tchuruk said. "I hope that no one asks me about Marconi again." He added.