Reporting a smaller second-quarter loss but a 16percentt drop in revenue, the telecommunications equipment maker Nortel Networks said yesterday that market conditions remained difficult and that it was taking a cautious approach to its business.
Alcatel's chief executive, Serge Tchuruk, has said that Alcatel, battered by the global drop in demand for telecommunications equipment, will shed one-third of the 99,000 employees it had at the end of last year and sell nearly half its 120 factories to trim costs by one-fifth and improve profitability.
McGinn said that Lucent's third problem was a drop in sales of telecommunications software that he attributed to a shift in industry order patterns that will level out during the year.
Kevin J. Martin, chairman of the F.C.C., said in an interview that since 1996, when Congress increased competition in telecommunications, prices have dropped for many other services.
Tyco's health care and security and fire systems businesses helped offset a drop in profit from electronics, which was hurt by the slowdown in telecommunications.
Analysts surveyed by Thomson Financial expect the drop in earnings of computer-related and telecommunications companies to narrow to 26percentt in the third quarter and to 2percentt in the fourth quarter.
Despite a relentless drop in the stock market value of telecommunications companies over the last year and a half, many executives have refrained until recently from acknowledging that the big bets they made on a new generation of wireless devices might have been premature.
But a one-off drop in prices due to cheaper imports from Asia, lower oil prices or deregulation in telecommunications is not the same as "deflation".
In telecommunications, prices on the previously most profitable business, long-distance service, dropped 38% between 1984 and 1988, while prices on local service rose 43%.
