There was pain for Alcatel-Lucent shareholders as the Franco-American company issued its third outlook warning this year on Thursday.

The company said it now expected 2007 revenue growth to be flat, at constant exchange rates. It had previously expected growth of about 5 per cent.

Alcatel said it had seen a “change in capital spending” by North American customers this year, meaning volumes had failed to make up for “ongoing price pressure”.

Standard & Poor’s downgraded Alcatel-Lucent from “buy” to “hold” and cut its estimates for 2007 and 2008.

“The decision to fight on all fronts for market position has, we believe, not resulted in market share conservation,” said S&P analyst Clara Van der Elst.

“As such, we worry about the company’s product line-up and strategy. We do not expect near-term positive news flow.”

Alcatel’s warning came in stark contrast to Swedish rival Ericsson, up 0.5 per cent to SKr26.42. It predicted this week demand would be strong in the third-quarter.

Alcatel-Lucent’s shares – which were trading at more than €8 just ten days ago – ended the day at €6.62, down 8.7 per cent. They have plunged nearly 40 per cent since the start of 2007.

WestLB said it still did not regard the weakness as a buying opportunity. “We would not upgrade our recommendation unless the stock were to reach €6,” said analyst Thomas Langer.

But the broader equity market enjoyed another positive session as takeover optimism was boosted by reports that some financing for the buy-out of Alliance Boots of the UK had gone through.

The FTSE Eurofirst 300 index rose 14.08 points, or 0.9 per cent, to 1,524.35.

Merger and acquisition hopes also helped lift some individual stocks.

Vallourec, the specialist steel tubing maker, jumped 4.8 per cent to €191.26 as rumours of a possible bid from Russia refused to die down.

Gazprom has frequently been cited as a possible buyer, with some traders suggesting a bid of up to €280 a share might be on the cards. Gazprom said yesterday it had no interest in acquiring the company. Lukoil is also believed to be on the lookout for

Vocento, the Spanish media group, climbed 5.9 per cent to €16.08 after reports that businessman Jaime Castellanos was preparing a bid.

Meanwhile, ArcelorMittal climbed 4.6 per cent to €48.20 after the steelmaker unveiled plans to buy back a further 27m of its own shares, on top of a $590m stock repurchase it has just completed.

Like M&A activity, share buybacks provided strong support to equities up until the recent bout of market turbulence.

Semiconductor stocks remained under pressure following disappointing guidance from US peer Texas Instruments.

However, Lehman Brothers yesterday upgraded its stance on the European sector from “neutral” to “positive”, based on expectations of a strengthening recovery.

Lehman upgraded Germany’s Infineon from “equal-weight” to “overweight”, and raised its price target from €12.20 to €16.

“We expect Infineon shares to outperform on additional gains in wireless and the gradual move away from dynamic random access memory,” said Lanalyst Andrew Gardiner.

But the broker reduced STMicroelectronics from “overweight” to “underweight” and lowered its target from €15 to €14. STMicro shares fell 3 per cent to €12.06 while Infineon eased 0.4 per cent to €11.98.

ASML, the Dutch chipmaking equipment manufacturer, fell 2.3 per cent to €21.82.

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