Newly formed monster vendor Alcatel-Lucent said Friday that it would cut 12,500 jobs over three years after delivering a loss in the fourth quarter and a significant reduction in full year profits.

In the first quarter of reported results as a combined company, Alcatel-Lucent posted a loss of Eur618m compared to a profit of Eur381m in the fourth quarter of 2005.

Quarterly revenues dropped from Eur5.2bn in 2005 to Eur4.4bn in the final quarter of 2006.

Full year profits at the firm dropped to Eur522m from Eur1.67bn, while revenues remained almost flat at Eur18.25bn in 2005 compared to Eur18.57bn a year ago.

Patricia Russo, chief executive officer of Alcatel-Lucent said “While the results for the fourth quarter are clearly disappointing, the positive long-term benefits of the merger and the growth potential of Alcatel-Lucent remain as envisioned.”

Russo said that results for the fourth quarter were impacted by a combination of short term uncertainty over the merger and challenging market conditions, particularly in North America.

These factors are expected to have a limited impact on business in the early months of the year, leading to some revenue decline in the first quarter 2007.

“We have now finalized Alcatel-Lucent’s product portfolio and aligned it with these key areas as evidenced by our investments in IMS, 3G mobile networks, services, next-generation optical, as well as wireless and wireline broadband access,” Russo said.