* Traders cite Chinese interest in Alcatel-Lucent
* Natixis raises to 'buy' from 'reduce'
(Adds details, quotes, updates shares)
PARIS, Aug 26 (Reuters) - Alcatel-Lucent shares jumped 16 percent on Wednesday as traders cited market talk of a possible bid from a Chinese manufacturer of telecom gear and a rating upgrade by Natixis.
A spokeswoman for the Franco-American firm declined to comment on the share price move. Spokespeople for ZTE and Huawei said they hadn't heard of any bid for Alcatel-Lucent.
Alcatel-Lucent has been struggling to turn a profit since its creation in a merger in 2006, which was supposed to help it cut costs and better compete with the new generation of Chinese gear makers including Huawei and ZTE, which have a much lower cost structure.
A Chinese bid for Alcatel-Lucent could run into regulatory problems because of its role via Bell Labs as a government and military contractor in the United States, analysts said.
"I don't believe that such a deal would really be possible," said Eric Beaudet, analyst at Natixis.
Alcatel-Lucent is also likely to be wary of another merger after the rough ride it had integrating its purchase of Lucent in 2006.
The company struggled to cut costs rapidly after the merger because it couldn't drop overlapping products for fear of losing customers, and cultural clashes among top French and American managers didn't help.
Some analysts think the Franco-American company has turned a corner and might reach profits soon.
Natixis analyst Beaudet upgraded Alcatel-Lucent on Wednesday to "buy" from "reduce" and increased its price target to 3 euros per share from 1.80 euros, citing improvements in its CDMA wireless business and the sense that the integration of Lucent was nearly complete.
Huawei and ZTE have been aggressively expanding overseas mostly through organic growth and have been taking share from rivals. Analysts said it was not clear if they had any plans for acquisitions.
"Chinese firms including ZTE are very strong competitors, and have their own substantial R&D operations," said Ren Wenjie, a telecom analyst with First Capital based in Shenzhen in southern China.
"They probably wouldn't be looking at buying the whole of Alcatel-Lucent, but rather at specific business units that would fit into their long-term strategy." (Reporting by Leila Abboud, Kirby Chien and Dominic Lau; Editing by James Regan/Will Waterman)