Alcatel-Lucent has taken a beating on both its share price and its reputation, with critics singling it out for significantly underperforming telecommunications gear rivals.

But Alcatel-Lucent isn't alone in its misery. LM Ericsson on Tuesday cut its third-quarter forecasts in a surprise announcement that caused the company's stock price to plunge almost 24%. In a sign of just how volatile industry conditions have become, Ericsson CEO Carl-Henric Svanberg said that the company learned of the disappointing numbers only 24 hours prior to the announcement.

Although Alcatel-Lucent and, to a lesser extent, the Nokia Corp.-Siemens AG joint venture have struggled with integration issues, Ericsson appeared to be doing fine. But Ericssson's warning has sparked fresh concerns about the overall health of the telecom gear industry.

Of course, what's bad news for Ericsson could be be good news for Alcatel-Lucent, or at least its CEO Patricia Russo, who faces pressure to outline a turnaround plan and demonstrate how the widely derided merger that created Alcatel-Lucent produces value.

The struggles of Alcatel-Lucent, which pinned its future on a huge merger, and Ericsson, which by contrast has opted to remain independent, underscore a real problem for big telecom equipment makers: Demand for their products remains spotty, and prices are falling. That obviously inhibits the sort of growth that massive companies require, which will fuel further consolidation. But what the industry really needs is innovation, and that's tough when corporate targets are fixed on the next quarter's financials. - Andrea Orr

See Sept. 13 story from TheDeal.com

See Oct. 16 press release from Ericsson