UPDATE 3-Alcatel posts 12th loss, sees slight 2010 pick-up

* Alcatel EBIT loss 11 mln euros vs fcast 14.4 mln loss

* Revenues 3.687 bln euros vs forecast 3.895 bln

* Confirms outlook but says markets remain tough
* CFO says close to selling a non-core business

* Shares down 8 pct

(Updates with share price, analyst, CFO comments)

By Leila Abboud

PARIS, Oct 30 (Reuters) - Alcatel-Lucent (ALUA.PA) posted a
12th straight loss in the third quarter and expects at least
three more, even with a modest recovery in the telecoms gear
market next year.

The Paris-based group is struggling with major spending cuts
by its top customers and fierce competition from low-cost
Chinese rivals, particularly in fixed-line networks, its
strongest business.

Alcatel-Lucent shares fell as much as 8 percent on Friday
following the publication of the results for the quarter ended
Sept. 30, as sales missed forecasts and its operating loss was
just a few million euros better than expected.

Analysts hope telecoms gear spending will pick up next year,
led by mobile and particularly in Asia, but few expect a big
bump in telecoms operators' spending next year.

"We expect nominal growth in the telecoms gear market next
year," Chief Financial Officer Paul Tufano told reporters in a
conference call. He defined nominal growth as 5 percent or less.

Tufano said the group was also working on selling non-core
assets. "One of those negotiations is in the late stages, and we
hope to have something to announce on that by the end of the
quarter," Tufano said.

One London-based analyst said the asset being sold could be
Alcatel-Lucent's bearings and vacuum pump unit, with a potential
valuation of a few hundred million euros.

Looking at the current year, Chief Executive Ben Verwaayen
said the market environment "remained challenging" and still
expected the global gear market to shrink 8-12 percent.

Alcatel-Lucent posted an adjusted operating loss of 11
million euros ($16.2 million) on revenues of 3.687 billion euros
in the three months to Sept. 30, compared with expectations of
14.4 million and 3.895 billion respectively, based on a Reuters
poll.

By 0952 GMT, the stock was down 7.3 percent at 2.66 euros,
having gained 80 percent this year while the DJ Technology index
.SX8P gained 18 percent.

Like its competitors Ericsson (ERICb.ST) and Nokia-Siemens
Networks, Alcatel-Lucent has been hit by sharp spending cuts by
telecoms groups such as France Telecom (FTE.PA) and Telefonica
(TEF.MC).

DEEPLY ROOTED PROBLEMS

But for Alcatel-Lucent, the problems stem from before the
current downturn.

Since the 2006 founding merger between Alcatel of France and
U.S.-based Lucent Technologies, the group has been plagued by
corporate culture clashes and delays in choosing its newly
combined product portfolios, which spooked customers.

The deal was supposed to give it scale to compete but
instead Alcatel-Lucent faced an increasingly brutal market with
intense price competition from low-cost Chinese manufacturers
Huawei HWT.UL and ZTE Corp (0763.HK).

The Franco-American group is also hampered by a weak
position in 3G mobile and a high cost base, analysts say.

"If Alcatel-Lucent keeps reducing costs so that they can get
back to tiny profits, ... the company from a fundamental point
of view is still in a tough spot," said Pierre Ferragu, analyst
at Bernstein Research.

"But it remains a company that will have trouble generating
good growth and delivering more than low-single digit operating
profit," he added.

On the cost cutting front, Verwaayen said the group had
already realised 80 percent of the 750 million euro in cost cuts
it was aiming for this year.

He also confirmed the previous guidance that Alcatel-Lucent
would reach break even on an adjusted operating basis this year
but does not see it turning a net profit until the second half
of 2010.

Alcatel-Lucent's rival Ericsson reported lower-than-expected
earnings last week, citing tough pricing conditions and slower
spending by customers in emerging markets. [ID:nLM420454]

For more on the companies in the telecom gear sector, please
click on [ID:nLU575794] [ID:nLU575794]
(Editing by Astrid Wendlandt and John Stonestreet)
($1=.6785 Euro)