Nokia’s top brass is thinking of approaching Alcatel-Lucent about a possible tie-up, according to various reports.
No formal talks are underway, say unnamed sources, but the Finnish firm is not surprisingly weighing up growth options ahead of selling its phone business to Microsoft.
It’s not clear whether Nokia – armed with proceeds from Microsoft – would be interested in swallowing Alcatel-Lucent whole or solely target its wireless business.
After the sale of its devices unit, Nokia will be heavily reliant on NSN, its mobile infrastructure and services operation.
And there is analyst speculation that NSN, combined with Alcatel-Lucent’s wireless business, would give the Finnish firm a much-needed leg-up in the US market where it has been traditionally weak.
That would leave Alcatel-Lucent to focus on its IP routing and optical business.
Analysts, cited by Reuters, value Alcatel-Lucent’s wireless business at between €1.1 billion and €1.5 billion.
In a recent note to investors (quoted by Bloomberg), Morgan Stanley said a combination of NSN and Alcatel-Lucent would create the second-largest player on the network infrastructure market, with a market share behind Ericsson’s 36 per cent and slightly ahead of Huawei’s 32 per cent.
Alcatel-Lucent and NSN would have a 45 per cent market share in the US versus Ericsson’s 50 per cent.
Speculation about a merger between the two companies is hardly new. Both have struggled to compete in the mobile equipment space against a formidable Ericsson and the growing strength of Chinese suppliers, particularly Huawei, on the international stage.
But a merger deal is far from imminent or a foregone conclusion.
One potential obstacle viewed by Nokia (according to one Reuters source) is that the French state owns 3.6 per cent of Alcatel-Lucent and the national government would likely resist in any sharp cutting of jobs.
Alcatel-Lucent is also going through a period of heavy restructuring, which adds further uncertainty.
Sources also point out Nokia is not alone in eying up Alcatel-Lucent. Juniper Networks and Ericsson, they say, may also be interested in snagging the French-US company’s assets.