Alcatel-Lucent says its merger took a toll on sales and margins, and warned that it could report steeper-than-expected drop in first-quarter sales.

The world's second-largest supplier of telecom and mobile equipment said it expects to report an adjusted operating loss of about 260 million euros in the first quarter, half of which would be related to "unusual significant items," which it declined to reveal before it reports first-quarter results in May.

Some analysts had already expected Alcatel-Lucent's sales to be more severely affected by the merger than initially predicted.

The group's merger, announced last April and completed in December, has created uncertainty around its future strategic technological choices, worrying customers and leading some to delay long-term investment commitments.

Alcatel and Lucent, which both underwent a thorough restructuring after the tech bubble burst, have issued a number of profit warnings in the past two years as they have struggled to adapt to volatile market dynamics.

Alcatel-Lucent warned on Tuesday of a steeper-than-forecast drop in first-quarter sales as its transatlantic merger took its toll on sales and margins and trading worsened in emerging markets.

After losing up to 3.2 percent the stock climbed back and gained much as 5 percent as investors' focus moved away from the warning and onto the group's near-term prospects, citing its strong order book and progress on cost-cutting.

(Continue reading this story on Reuters UK)

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