Alcatel-Lucent, one of the world's biggest industry players in telecommunications, reported a net loss of 3.5 billion euros ($5.12 billion) for its first year since the merger. This bad news was followed by a weak outlook for the 2008 fiscal year which scrapped its dividend.

The French company purchased its U.S. rival Lucent in 2006.

The telecoms equipment group incorporated in France and with its global executive offices in Paris said the net loss figure included a 2.94 billion-euro-impairment charge taken in the fourth quarter to reflect a drop in value of Lucent's mobile assets. But without taking the write down into account, Alcatel-Lucent reported an annual loss of 443 million euros, beating a 789 million euro average forecast of analysts sampled by Reuters Estimates.

Alcatel-Lucent also said in its statement that it will most probably incur an adjusted operating loss in the present quarter due to "seasonal patterns".

"The macroeconomic environment has created uncertainty in our markets in the last few months," Alcatel-Lucent CEO Patricia Russo said in a statement.

In its statement, the company also made a disappointing forecast and said it expects an adjusted operating margin of between 2.5 and 5 percent for 2008 while they expected on average 5.4 percent.

Alcatel’s Finance Director Hubert de Pesquidoux explained that most of the operating losses were mostly incurred by the company’s mobile activities during what he called “a difficult year."

Alcatel-Lucent recorded sales of 17.8 billion euros in 2007, faintly above a forecast of 17.5 billion euros based on Reuters Estimates. The fourth quarter sales were of 5.23 billion euros, up 18 percent year-on-year, and an adjusted operating profit of 303 million euros.

The group’s shares slipped to a record low of 3.80 euros but climbed back as European stock markets turned sharply higher. By 8:14 a.m. (British time) the stock was down 0.2 percent at 4.12 euros.