Mergers not best solution for Alcatel, says CEO

PARIS, FRANCE: The head of Alcatel-Lucent, the French telecom equipment maker seen as a possible takeover target, said on Thursday that deals were not the best solution for the company's problems.

Some investors, analysts and executives at rival telecom group Nokia-Siemens Networks believe that another round of consolidation could be in the offing in the telecom gear sector to offset pressure on pricing and margins.

"I've said many times before, M&A (mergers and acquisitions) is not the way out of our problems. We need to fix our own stuff," Alcatel-Lucent Chief Executive Ben Verwaayen at the ETRE technology conference in Paris.

When asked whether he envisaged buying smaller companies to gain access to promising technologies, Verwaayen said acquisitions were not always the right solution and that partnerships could also boost innovation.

French-American Alcatel-Lucent has not made a profit since it was created in a difficult merger three years ago, but its shares have gained about 80 percent this year, compared with 25 percent for the DJ Stoxx technology index .

Some investors are betting that the firm has turned a corner or stands to benefit more from a broader economic recovery.

Verwaayen took over the firm one year ago, and pledged to return the firm to "break-even" by the end of the year, despite a tough outlook in the telecom gear sector.

"In my second year, I want to get Alcatel-Lucent used to winning again," he said at the conference. "By the third year we will be a normal company."

He went on to explain that his definition of a healthy company was one whose customers know exactly what it provides and a place where talented people want to work. "You also need to pay your shareholders a dividend," he said.

Alcatel-Lucent reports third quarter earnings on October 30.