Alcatel boss Patricia Russo has so far failed to lead a recovery

The 2007 results include a 2.5bn euro charge related to the value of a mobile phone business owned by Lucent.

The firm warned of further losses and scrapped its dividend for the year.

France's Alcatel and US based Lucent have been struggling since their merger was announced in December 2006, shares have fallen around 60% since then.

Weak outlook

Plans to shrink the firm's work force by a fifth failed to boost earnings as the company battled fierce price competition and falling orders in the US.

This year is looking weak too.

Alcatel-Lucent expects to incur a loss in the first quarter of 2008 as a result of "seasonality".

"The biggest problem is the outlook for this year," said Nomura analyst Richard Windsor.

"Where are the 600 million euros promised in savings for 2007? Looks like they are going in the pockets of customers not in the pockets of shareholders," he added.

But the chief executive remains optimistic.

"While the long-term prospects of our industry remain good, the macroeconomic environment has created uncertainty in our markets in the last few months," said Patricia Russo, Alcatel-Lucent's chief executive.