For the fourth quarter it posted a net loss of 613m euros ($796m) compared to a year-ago profit of 355m euros ($461m). Sales rose to 3.87bn euros ($5.03bn) from 3.52bn euros ($4.57bn).

The impact of the fourth quarter is clearly shown in our results, said CEO Patricia Russo on Friday. She said three factors contributed to the poor results in the quarter: market uncertainty as carriers held off purchasing decisions during the merger; the overall market decline in which Russo pointed to the decline in US carrier spending after the wave of consolidation swept through that market; and heightened competition especially in the global wireless markets from rivals such as China’s Huawei Technologies Co Ltd and Sweden’s LM Ericsson Telefon AB.

For the full year ended December 31, the Paris, France-based company posted a net loss of 131m euros ($170m), down from a net profit of 971m euros ($1.26bn) in 2005. Sales rose 12.28bn euros ($15.96bn) from 11.22bn euros ($14.57bn) in 2005.

Alcatel-Lucent began operating as a merged entity on December 1, 2006, following the $11.6bn bid by Alcatel SA for Lucent Technologies Inc last April to create the largest telecommunications equipment maker in the world. The two companies had first proposed a merger in 2001, but talks were called off after the two failed to agree terms and meet regulatory demands.

While the new deal had been touted as a merger of equals, Alcatel shareholders control about 60% of the new company. The board is evenly split between former Alcatel and Lucent directors.

The merger of these companies has not been without a price however, and the company announced on Friday that it would cut another 3,500 jobs on top of the already announced 9,000 jobs cuts. Alcatel-Lucent now plans to shed a total of 12,500 jobs, or 16% of its workforce, over the next three years. It gave no details of where the cuts would be made, although it is expected to provide more details in the next couple of weeks.

However, the French unions, already wary of US executive tactics to cut jobs in order to reduce costs, are sticking to their calls for a one-day strike on February 15. The combined company had approximately 80,000 employees at the end of 2006.

There is little doubt that headcount figures have been declining at major network equipment makers over the past five years. In 2001, Alcatel’s headcount stood at 99,000, but by 2005 it was 57,699.

These are very difficult decisions to make, said Russo. She went on to add that the job losses, plus other measures such as cutting costs in its supply chain, eliminating duplicate jobs, and reducing the number of products, would increase total merger-related synergies to 1.7bn euros ($2.21bn) from the previously forecast 1.4bn euros (1.82bn), with 600m euros ($780m) cost savings expected to be achieved in 2007.

Russo tried to maintain a positive note, confirming that Alcatel-Lucent is seeing the continued migration of carriers to all IP-based networks, which she called a major transformation of our industry.

But looking forward, she made clear that the markets could not expect an improvement in the first quarter of 2007, and she warned that growth would be down on the first quarter 2006. However, we will ramp up from there and growth will be in line with carrier growth rates, she said.

Russo said she expects the carrier market to grow in single mid-digits while Alcatel-Lucent’s sales growth would grow at approximately 5%. She refused to issue any detailed guidance for the year.

Shares in the company fell 3.51% to $13.19 on the New York Stock Exchange on Friday.