Telecom gear maker Alcatel-Lucent is very confident of hitting a target to improve its operating margin this year and expects new products and cost cuts to support profitability beyond that.
The need for telecom operators to invest to keep up with booming data traffic will continue to shape the industry and improve Alcatel-Lucent's fortunes in the coming years, Chief Executive Ben Verwaayen told the Reuters Global Technology Summit.
Verwaayen is in the home stretch of a three-year turnaround plan for the Franco-American telecom gear maker, which calls for the group to reach adjusted operating margins of 5 percent or better this year. Last year, its adjusted operating margin was 1.8 percent.
Analysts and investors are debating what level of margins Alcatel-Lucent will be capable of in the longer term.
Asked to comment, Verwaayen said on Thursday: The whole portfolio of Alcatel-Lucent is geared toward more software, more integration, more IP, and that carries a somewhat higher margin than the traditional hardware.
The company still has a lot of room to cut costs in everything from information technology to its supply chain, he added.
If you stabilize some of the margin capabilities and you reduce your cost, then you have a company with a very solid model, he said.
Asked whether he plans to stay on at Alcatel-Lucent after the turnaround plan is completed, the CEO said: I have no plans to do anything else.
(Editing by James Regan)