Nortel wary of deals in tight credit market: CEO

TORONTO (Reuters) - Nortel Networks Corp's NT.TONT.N chief executive said on Wednesday the company is capable of making acquisitions to help its growth, but he suggested it will continue to hold off from deal-making, given the tight credit markets.

Nortel, North America's biggest maker of telephone gear, wants to focus on organic growth, but it wouldn't shy away from a deal if one came along at the right price and could be integrated successfully, Mike Zafirovski told reporters following the company's annual meeting in Ottawa.

"In the current environment, of course, financing is a challenge relative to where it was a year ago," he said, adding: "We will not do anything silly."

In an interview, Bill Nelson, Nortel's executive vice-president of global sales, said an acquisition could help the company fill in gaps in its technology portfolio, or perhaps grant it access to markets where it currently has a limited presence.

While the state of credit markets means that arranging a debt financing could be difficult, Nortel's share price is also very weak, meaning the stock would not make for an attractive currency for a takeover.

The shares were up 1 Canadian cent at C$8.49, on the Toronto Stock Exchange on Wednesday, though in March, they slumped to C$6.45. Adjusted to take account of a stock consolidation in late 2006, it was a low not seen since 1981.

Nortel has stayed on the sidelines while competitors such as Alcatel-Lucent (ALU.N) consolidated in a bid to capture more market share.

It has also faced stiff competition from lower-cost Asian vendors, such as Huawei Technologies HWT.UL, and some analysts have questioned the Toronto-based company's long-term ability to compete.

Meanwhile, Nortel is betting that as more and more devices -- aside from computers and mobile phones -- begin connecting to the Internet, bandwidth demand will soar and spur sales of its technology and equipment.

That has yet to materialize as Internet service providers and wireless carriers have remained reluctant to spend big on large-scale upgrades or expansions for now.

Nortel has also had to contend with a soft U.S. economy which has the potential to hurt its big enterprise or corporate clients. So far, that hasn't happened, Nelson said.

"We really haven't seen the big fall-off in opportunity there," he said.

($1=$1.00 Canadian)

(Reporting by Wojtek Dabrowski; editing by Rob Wilson)