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Updated from 8 a.m.



fiscal first-quarter profit dropped by nearly 50% from a year ago, and the company's latest-quarter revenue fell short of Wall Street estimates. Shares fell 7% in midday trading.

For its quarter ended Dec. 31, the Murray Hill, N.J., telecom gearmaker earned $174 million, or 4 cents a share. That's down from the year-ago $338 million, or 7 cents a share, but in line with the Thomson First Call analyst consensus estimate.

Revenue rose 3% from a year ago to $2.34 billion, but that number represents a 3% decline from fourth-quarter levels and fell short of the $2.4 billion Wall Street estimate.

"While the wireline market remains a challenge in the near term, we continue to execute on a long-term strategy of investing in areas that are critical to our vision of convergence such as next-gen optical, VoIP, broadband access and mobile high-speed data, as well as services, government and emerging markets," CEO Patricia Russo said.

The company reiterated its guidance for fiscal 2005 ending in September, saying, "We continue to expect Lucent's annual revenues for fiscal 2005 to increase on a percentage basis in the mid-single digits, which we believe will be at or above the market growth rate."

The results come in a quarter in which Lucent notched up some solid contract wins, notably a piece of Cingular's big wireless upgrade plan.

Wednesday, Lucent dropped 28 cents to $3.42.