PARIS--Telecommunications-equipment maker Alcatel-Lucent SA boosted its gross margin in the first quarter, but slow spending by big U.S. telecoms companies pushed it to another year-over-year loss, highlighting the promise and the peril Nokia Corp. faces as part of its EUR15.6 billion ($17.7 billion) takeover bid for the Franco-American firm.

The money-losing Paris-based maker of wireless network gear and Internet-routing equipment on Thursday reported a net loss of EUR72 million, or 3 cents a share, compared with a net loss of EUR73 million, or 3 cents a share, a year earlier.

Alcatel-Lucent's adjusted operating income more than doubled to EUR88 million from EUR33 million a year earlier, roughly in line with analysts' expectations, as the company improved its gross margin to 34.6% from 32.3% a year earlier by selling more software compared with hardware, and on continued cost-cutting.

The company continued to burn cash, reporting a EUR332 million free cash flow loss in the first quarter, compared with a free cash flow loss of EUR398 million a year earlier. But Chief Executive Michel Combes reiterated his commitment that Alcatel-Lucent will show its first-ever full year of positive free cash flow in 2015.

"In a challenging environment and in particular a slow spending environment in North America, Alcatel-Lucent was able to increase its margin," Mr. Combes told reporters.

The results underscore the challenges and the benefits Nokia could reap if it completes its bid to take over Alcatel-Lucent. Both companies have been through rounds of brutal cost-cutting, which helped push Nokia's equipment arm back to profit, but has yet to do so at Alcatel-Lucent. Since it was created in 2006, Alcatel-Lucent has had negative free cash flow on a yearly basis.

Still, Nokia could use Alcatel-Lucent as it looks to expand more deeply into the U.S. market. Moreover, the Finnish company posted disappointing margin figures for the first quarter, leading to earnings well below expectations. By contrast, Alcatel-Lucent's rising gross margin came from growing software sales and general improvements in profitability, the company said.

The rising dollar pushed Alcatel-Lucent's revenue up 9.2% to EUR3.24 billion for the quarter, but at constant rates the firm's revenue was actually down 4%, Alcatel-Lucent said. Slowing sales in the U.S. market, home to two of its biggest clients, Verizon Communications Inc. and AT&T Inc. was largely to blame, offset by increasing sales in an improving European market and in Asia. Created from the merger of France's Alcatel and the U.S.'s Lucent, the company still has significant dollar costs for its U.S. operations.

The company's star Internet-routing unit, which has been an engine of growth, turned into a drag this quarter, as slow spending in the U.S., and Japan, on its routing gear pushed revenue down 6% in year on year terms--and given the strong dollar also pushed down the company's euro-denominated profit on the U.S.-centric division.

Alcatel-Lucent's troubled wireless-networking business was a bright spot, with flat revenue in constant-currency terms, with rollouts of high-speed LTE networks in China were offset by weakness in the U.S.

Write to Sam Schechner at sam.schechner@wsj.com

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