Jan. 13 (Bloomberg) -- Lucent Technologies Inc., the largest U.S. telephone equipment maker, said first-quarter sales unexpectedly tumbled and revenue this year will miss forecasts. The shares declined.

Frank D'Amelio, currently chief financial officer, was named chief operating officer as part of the Murray Hill, New Jersey- based company's effort to revive sales. Waning demand in the U.S. and China is weighing on revenue, Lucent said today in a statement.

Lucent Chief Executive Officer Patricia Russo has struggled to achieve consistent growth since demand from telephone companies tumbled in 2001 and 2002. D'Amelio's ascension may signal Lucent's board is increasing pressure on Russo to drive revenue. The shortfall is a ``temporary setback,'' said Russo, who took over in January 2002.

``It was frustrating last year and it looks like it's going to be frustrating this year,'' said Michael Binger, who helps manage $2.5 billion at Thrivent Financial in Minneapolis, which sold its Lucent shares about six months ago.

Sales in the quarter ended Dec. 31 fell to $2.05 billion from $2.34 billion a year earlier, Lucent said. Ehud Gelblum, a New York-based analyst at JP Morgan Securities Inc., had estimated sales of $2.41 billion and analysts on average had anticipated $2.44 billion according to a Thomson Financial survey of 26 estimates.

`Big Miss'

``The magnitude of the miss is still quite remarkable,'' Gelblum, ranked the No. 3 phone equipment analyst by Institutional Investor magazine last year, wrote in a note to clients today.

Lucent shares, down 22 percent in the past year before today, dropped 19 cents to $2.52 at 9:48 a.m. in New York Stock Exchange composite trading. Shares of Nortel Networks Corp., the largest North American phone equipment maker, fell 3.9 percent, or 13 cents, to $3.24.

D'Amelio's appointment signals Lucent is preparing him to take over from Russo, Gelblum said. D'Amelio has been with Lucent since 1998. He joined as president and became CFO in May 2001, helping guide Lucent away from the taint of an accounting fraud.

D'Amelio began his career in 1979 at Bell Laboratories. He was appointed controller of AT&T Corp.'s Network Systems division before becoming CFO in 1996, the year Lucent was spun off from AT&T. As operating chief, D'Amelio will work with Russo and be responsible for leading the operations of the business including sales, the product groups, the services business, the supply chain, information technology operations, and labor relations, Lucent said.

Russo

In four years as CEO, Russo, 53, returned the company to profit in 2004 and 2005. She failed to spur the share price, which tumbled 50 percent since she took over. A former division head at Lucent, she had been president and chief operating officer at Eastman Kodak Co. for less than nine months before taking the top job at Lucent.

Lucent likely is suffering from waning demand from China Unicom Ltd. and China Telecom Corp., Gelblum said. In the U.S., Verizon Wireless and Sprint Nextel may have purchased less than Lucent thought. Cingular Wireless LLC, the largest U.S. mobile- phone company, also may have disappointed, he said, although Cingular is not a large Lucent customer.

Sales in fiscal 2006 will be unchanged or increase in the ``low-single digits,'' Lucent said today in a statement. It had previously said sales would rise in the ``mid-single digits'' from a year earlier.

`Pause'

``It's a pause between projects,'' said Simon Leopold an analyst at Morgan Keegan & Co. in New York. ``There's a slowing by Verizon Wireless and a slower ramp up from Cingular.'' Leopold estimates 30 percent of Lucent's revenue is from Verizon Communications In., the No. 2 U.S. phone company.

Lucent spokesman Bill Price said the company got 9 percent of its 2006 sales from China and 63% from the U.S.

Lucent, the former phone-making unit of AT&T Corp. named Western Electric, said it would provide more details with its final results on Jan. 24. It didn't provide any profit figures today.

Lucent has said it will cut 1,000 jobs this year. It has already reduced its workforce to 30,500 employees from 106,500 four years ago.

Lucent had been on the road to recovery. The company has had nine straight profitable quarters after 13 periods of losses. In the fourth quarter, the company posted its first sales increase of fixed-line and network equipment in more than two years.

Demand for wireless equipment didn't hold up. Sales of wireless gear declined for the first time in five quarters in the fiscal fourth quarter, Lucent said in October.

That caught analysts' attention. Of analysts tracked by Bloomberg, five now rate the shares ``buy,'' 17 recommend holding them and 14 have a ``sell'' rating. Back in July, only eight suggested selling the stock.