Lucent ( LU) delivered steady improvement Wednesday, but investors obviously prefer big growth. With a flat top-line performance and a forecast for single-digit growth this year, Lucent isn't exactly kicking up the dust on its road to recovery. Shares of the Murray Hill, N.J., telecom-equipment shop hit the skids after the company reported lackluster numbers for the fiscal first quarter ended last month. At midday, Lucent was down 29 cents, or 7%, to $3.41. Meanwhile, accounting-challenged rival Nortel ( NT) was off 7 cents, or 2%, to $3.17. Obviously the reaction has a lot to do with how high expectations have been running for Lucent, with some analysts looking for more than 5% sequential sales growth for the quarter. As it turned out, first-quarter sales were flat with fourth-quarter levels. Another part of the disappointment came from a sharp shortfall in Lucent's local mobile phone gear business, which is called the Personal Handyphone System, or PHS. Maybe even gloomier was the company's bracing assessment of network spending patterns. On a conference call with analysts, Lucent CFO Frank D'Amelio said spending on old phone gear is falling faster than spending on new products is rising. And while that suggests a somewhat disturbing trend, Lucent fans point out that the company remains strong in a number of areas. They cite third-generation wireless upgrades in the U.S. and network services, where the company collects a steady stream of revenue from long-term contracts. Lehman Brothers analyst Steve Levy is bullish on Lucent. He's among those who think investors may have been expecting a bit too much from the slowly recovering gearmaker. Levy points out that Lucent improved its gross margin by a point to 42% last quarter and that expected improvements in areas like patent licensing could add millions in royalty revenue and another penny to the company's bottom line. Levy, who has a buy rating on Lucent, calls the stock attractive at these levels. He says the company's promises to rack up 5% sales growth is actually achievable in a year when he predicts industrywide equipment spending will rise just 3% to 4%. Lucent says it is starting to recognize revenue from its 3G wireless customers Verizon Wireless and Sprint ( FON), but has yet to book any sales from its upgrade contract with Cingular. This gives optimists hope that annual growth of 5% or better is in the cards. Of course, seasoned Lucent watchers know that just as recovery is always around the corner, the road often holds another pitfall as well.