Easy come, easy go. Less than a month after

Alcatel

(ALA)

surprised the market with an upbeat outlook, the French telecom-equipment provider released a grim 2003 forecast that wiped out shares in the sector Tuesday.

Although Alcatel maintained it would hit break-even on continuing operations by the end of this year, the company predicted a first-quarter sales decline of 25% to 30% and a 15% sales drop across the industry this year. Alcatel blamed the strengthening of the euro against the dollar and soft demand from telecom equipment. The news comes just a day after Swedish wireless telecom equipment giant

LM Ericsson

(ERICY)

disappointed investors with forecasts for a wireless-equipment industry decline of 10% in 2003.

The outlook runs counter to Alcatel's more optimistic forecasts in January, when it told investors its fourth quarter would outperform expectations, and hinted that a potential recovery in the battered communications sector may take hold this year.

"This is the combination of what happens with severe overcapacity in this sector," said Pittsburg Research analyst Steven Artuso, adding that the sector's hope for recovering "seems to be pushed back six months to a year every single year."

Alcatel's new announcement shaved communications-equipment stocks in early trading. Alcatel fell 2.1% to $6.85, while

Lucent

(LU)

lost 4.4% to $1.76.

Nortel

(NT)

fell 3.7% to $2.33. Ericsson shed 9% to $6.65, while

Nokia

(NOK) - Get Report

lost 1.1% to $14.24 and

Motorola

(MOT)

fell 1.1% to $7.91.

Analysts said Alcatel's stock may be less affected by its somber outlook than some of its peers, because the company's exposure to the struggling wireless-infrastructure business is less than that of its competitors. While Alcatel never has broken down sales or market share in the wireless-equipment sector, analysts say it doesn't rank within the top five vendors.

Alcatel also said Tuesday that it lost 1.12 billion euros in the fourth quarter, compared with a loss of 1.5 billion euros in the same period last year. Sales fell 33% to 4.51 billion euros from 6.77 billion euros.

For the full year, the company lost 4.75 billion euros, compared with a loss of 4.96 billion euros in 2001. Sales in 2002 fell 35%, to 16.55 billion euros from 25.35 billion euros last year.