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Alcatel shares dive 40 %
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September 17, 1998: 12:04 p.m. ET
Stock plummets on poor earnings outlook; deal signed with Ascend
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NEW YORK (CNNfn) - Shares of Alcatel dropped more than 40 percent after the telecom equipment maker reported the growing global economic crisis and a drop in orders would adversely affect its earnings.
The company's stock was down 41.86 percent at 540 francs on the Paris bourse Thursday afternoon.
On the New York Stock Exchange, shares of Alcatel (ALA) fell more than 33 percent to 20-13/16 in morning trade.
Alcatel cited sharp investment cuts by its traditional client base and the deepening crises in Southeast Asia and Russia for a lower-than-expected operating income.
"After reviewing the accounts and currently available forecasts, Alcatel anticipates that 1998 will not meet expectations in regard to the group's operating performance," the company said.
Chairman Serge Tchuruk told a news conference that big telecom operators such as Deutsche Telekom, France Telecom and Telefonica had reduced their orders after privatization to prune their cost base in a liberalized market. But he added they will pick up again.
He said that without the order cuts and Asia effect, first-half sales would have been 10 percent higher than the 61.6 billion francs ($10.91 billion) reported. For the full year, he said, the impact will reduce sales 8 percent.
Tchuruk said the group won't be able to hit the 5.5 to 6 billion francs in operating income from telecoms in the full year 1998 as expected by analysts.
The company said its full-year sales should increase about 10 percent from 1997's 131 billion francs, taking account of a change in company structure.
Separately, the company said it has formed an alliance with Ascend Communications Inc. to develop next-generation Internet access solutions.
Alameda, Calif.-based Ascend makes computer networking equipment.
The multiyear deal extends an existing relationship to develop new networking products and substantially expands their distribution agreement.
The products to be developed include an IP Service Access gateway based on Ascend's next-generation IP-forwarding technology and Alcatel's ADSL systems throughout the world.
Shares of Ascend (ASND) shed 1/7/16 to 43-1/2 on the Nasdaq Thursday morning. 
-- from staff and wire reports
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