Shares in telecoms equipment maker Alcatel Lucent have jumped 20% after it reported an annual profit and said it was targeting better profit margins.

The firm posted a 1bn euro ($1.3bn; £840m) profit for 2011, compared with a 334m euro loss in 2010.

Profits for the last three months of 2011 rose to 868m euros, up from 340m euro profit in 2010.

The company also said it was targeting 500m euros of cost savings in the coming year.

"We target, in 2012, additional savings of 200m euros in fixed costs and 300m euros in variable costs," said chief executive Ben Verwaayen.

"Overall, this concludes a second year of strong improvement in our results, and leads to the first positive full year net results for Alcatel Lucent since the merger," he added.

Alcatel merged with US-based Lucent in 2006.

"Although visibility remains limited, our aim for 2012 is to achieve an adjusted operating margin higher than the level reached in 2011, and reach a strong positive net cash position at the end of 2012," Mr Verwaayen said.

In November 2011, the firm issued a profit warning and committed itself to a 521m euro cost-cutting programme.

Although the firm has been targeting growing demand for mobile broadband by supplying network equipment to support it, revenues at its wireless division fell 22% in the three months to the end of December 2011 compared to the same period in 2010.

Alcatel Lucent said it was affected by a drop in demand in its American markets as customers reined in orders towards the end of the year.

Akshay Sharma at research group Gartner said: "2012 will be challenging with increased competitive pressures from Huawei, Ericsson, and Nokia Siemens Networks."

Source :bbc.co.uk