The company said that it expected better results during the remainder of 2012, Reuters notes.
That didn’t mollify investors who hammered the company’s stock, driving Alcatel-Lucent shares down more than 18% in Tuesday morning trading.
Alcatel-Lucent has been trying to reduce costs and says it has realized savings of $122 million compared to last year.
The economic slowdown in Europe and Asia has hurt the company’s sales as worldwide spending on telecommunications equipment falls.
Analysts noted that the company is also seeing increased sales of low-margin equipment in emerging markets, which is eroding profits.
The company had previously estimated profit margins of more than 3.9%, but will issue revised guidance later this month. Analysts at Deutsche Bank (NYSE:DB) forecast Alcatel-Lucent’s operating margins for 2012 at 3%.