Still, both the CEO and CFO were adamant that no margin guidance could be given until early 2008, though Russo stressed that the company is working hard on cutting costs by rationalizing its product portfolio and manufacturing capacity and finding procurement savings.

    However, "the unknown factor [that affects] gross margins is industry prices," stated Russo, though in direct response to an analyst question about whether the merger will be worthwhile, she added, "We will be able to produce better margins than we would have been able to produce separately..."

    "We believe in the long-term benefits of the merger, [though] some near-term issues have hit gross margins in this quarter. We are managing a large, complex integration in an industry that's not waiting for us to complete the process. We expect a strong ramp in revenues [during the second half of the year] based on the strong order flow, though obviously we need to execute against those customer orders."

    The company's cost base will also be lower by the end of this year, stated the CFO. Second-quarter operating costs, at €1.5 billion ($2 billion), were down 3 percent compared with a year earlier and down 3.4 percent compared with the previous quarter.

    Some of those savings come from headcount reductions. During the second quarter 1,900 staff left the company, taking this year's total to 3,800, about 30 percent of the three-year jobs cull target of 12,500. AlcaLu says it's on course to achieve its annual cost savings target of €600 million ($822 million) this year. (See Alcatel-Lucent Job Cull Hits 12,500.)

    "The reduction in our operating costs is accelerating," said Beaufret, "and savings will be more visible in the second half of the year."

    Russo is even bullish about AlcaLu's performance in the ultra-competitive wireless infrastructure market, where the company has performed poorly in the first half of the year. The CEO said the vendor will start to see the impact of its new GSM platform, with its "better functionality and cost profile," in the second half of the year, and that the comp any has "good growth prospects in GSM and WCDMA," especially in "emerging, high-growth markets."