The French telecoms equipment maker Alcatel posted a record loss of 4.96bn euros ($4.2bn; �3bn) for 2001, thought by analysts to be the biggest ever reported in France.

Nonetheless, Alcatel's share price skipped higher on the Paris market on predictions of a return to profitability this year.

Alcatel's president and CEO, Serge Tchuruk, said: "Even if the market remains soft, from the second quarter on we see sequential growth in quarterly sales and income...with full year income from operations turning positive."

Alcatel is in the midst of a huge cost cutting programme, centred on shedding 34,500 jobs, amounting to 30% of its staff, in the two years to December 2002.

Payoff

Savings from the layoffs will start to benefit the firm this year, said Mr Tchuruk.

But the first three months will remain grim.

Sales are expected to be 30% lower than in the final three months of 2001, while operating income will be "essentially unchanged", thanks largely to cost cuts.

Applause

Analysts rushed to upgrade the stock, however, cheered that losses were in line with expectations and the firm's 2002 forecasts. Alcatel's sales were better than its rivals, they noted.

"We are very impressed by this strong set of figures," said ABM Amro in a research note.

Both it and SG Securities gave Alcatel's shares a "buy" rating.

Alcatel's shares were up 4.6% at 18 euros in midmorning trade in Paris.