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Barclays considers Alcatel-Nokia M&A speculation credible

  • Barclays, which upgraded Alcatel-Lucent (ALU +4.3%) to Overweight and cut Ericsson (ERIC -1.9%) to Underweight this morning, thinks speculation about a merger between Alcatel and Nokia (NOK -0.5%) is credible, and sees the combined company providing tougher competition for Ericsson (currently the mobile infrastructure market's top vendor).
  • There have been reports Nokia, set to reap a $7.2B windfall from the Microsoft deal, is thinking of approaching Alcatel about a tie-up. However, no talks are believed to be underway, and the reports didn't explicitly state Nokia is eying a full-blown merger.
  • Mergers between major networking/telecom equipment vendors have often yielded share losses rather than gains in the quarters following the deal's completion, thanks to both integration challenges and efforts by common customers to diversify their supplier lists. Alcatel's merger with Lucent acts as an example.
Comments (13)
  • JoseV
    , contributor
    Comments (397) | Send Message
     
    Alcatel's merger with Lucent is a classic sign of Management incompetency. The merger should have been a great sucess but Management was more interested in displaying their egos then acting n the good of the merged firm. A merger with Nokia should be a great success, if it does happen, Nokia's Board who would be in the Driver's seat, should immediately appoint Mr Combes as the CEO OF THE NEW FIRM.
    14 Oct 2013, 03:32 PM Reply Like
  • raydx
    , contributor
    Comments (27) | Send Message
     
    Americans, french and now finns, yeah they are going to kick butt, lol. How are they going to integrate their system. superglue
    14 Oct 2013, 05:03 PM Reply Like
  • dwdallam
    , contributor
    Comments (6563) | Send Message
     
    Ray

     

    Exactly. The deal between ALU and Nokia, if there is one, simply must be wireless only, at least for now. If they could make the wireless work, it would be a great upside for both companies. However, Nokia must get the wireless division in a clean break, or ALU will bleed Nokia of it's new cash horde to the point of Nokia bleeding out.

     

    Nokia just proved it can generate profits and has the balls to do what it needs to do to get into black. ALU hasn't proven that yet. I'm not saying they can't or won't and their current momentum suggest they can, but I'd like to make sure before Nokia merging or whatever with ALU.
    14 Oct 2013, 05:32 PM Reply Like
  • raydx
    , contributor
    Comments (27) | Send Message
     
    The top management in Nokia is good. I believe they got the better half of they deal by selling the handset division to MS. The network business is tough with margins being squeezed by the the Chinese. It would be tough for the NSN group to compete against the likes of ALU, Hauwei, ZTE and Ericsson. Its the NSN part of Nokia that will be sold. Looks like the buyer will be ALU. I own Ericsson, their management is good, and IMHO positioning the company in the right sectors, mainly concentrating on the managed services business. From what I read Ericsson is the leader in LTE.
    14 Oct 2013, 06:14 PM Reply Like
  • sidiji
    , contributor
    Comments (144) | Send Message
     
    Nokia needs to wait until ALU goes bankrupt, then it can pick up whatever it wants for pennies on the dollar and without any potential liabilities. Having all of NSN should be plenty enough to keep Nokia busy for now....in M&A he who hesitates most times come out ahead.

     

    It's time Nokia looked after its much abused shareholders instead of unnecessary dealmaking...after Devices in recent years, I think the Board will be wiser and more cautious.
    14 Oct 2013, 11:21 PM Reply Like
  • ted lujan
    , contributor
    Comments (511) | Send Message
     
    If Nokia purchases The wireless division of Alcatel if might be of some benefit to Nokia. A merger with Alcatel would be a money losing disaster. Why mess with a Socialist company and contend with French Egos.
    14 Oct 2013, 05:12 PM Reply Like
  • JoseV
    , contributor
    Comments (397) | Send Message
     
    Ideology is bad for investment. If you really one to know why an ALU-NOK merger makes sence, consider the following: Alcatel On-Going Business/Product Initiatives:
    1. ALU is a leader in development of LTE (Long Term Evolution, marketed as 4G LTE) a standard for wireless communication of high-speed data for mobile phones and data terminals. It is based on the GSM/EDGE and UMTS/HSPA network technologies with greater capacity/speed, radio interface and core network improvements. The LTE standard was finalized in December 2008, and the first publicly available LTE service was initially launched by TeliaSonera in Oslo and Stockholm. LTE services have recently been launched by major North American carriers. Originally, CDMA operators had planned to upgrade to rival standards called UMB and WiMAX, but all the major CDMA operators (such as Verizon, Sprint and MetroPCS in the United States, Bell / Telus in Canada, KDDI in Japan, SK Telecom in South Korea and China Telecom/China Unicom in China) have announced that they intend to migrate to LTE.

     

    2. ALU is cooperating with many National Telecom operators In the development of broadband Information and communications technology (ICT) infrastructure projects composed of more than10,000 kilometers of fiber to be implemented in DBO model (Design, Build and Operate) or DBOT model (Design, Build, Operate and Transfer). An example of these ventures is a Polish project of PLN 1.4 billion, with a European Union subsidy of PLN 1 billion, to be completed before December 31, 2015.

     

    3. Alcatel-Lucent et Zain KSA ont annoncé l'achèvement d'un réseau basé sur le concept AON (Agile Optical Network) pour fournir un accès très haut débit à travers le Royaume d'Arabie saoudite. Le réseau d'infrastructure optique repose sur une technologie WDM/OTN (wavelength division multiplexing/optical transport, multiplexage par répartition en longueur d'onde/transport optique) convergée, qui permet à Zain d'offrir une capacité de 100 gigabits par seconde (100G) dans les principales villes du pays.

     

    4. Zain et Alcatel-Lucent testent également la transmission de donné à Djeddah avec une solution optique deb400Gbits/s d'Alcatel-Lucent, basée sur sa plateforme Photonic Service Engine (PSE) 400G, qui répond à l'émergence de nouveaux débits et de performances toujours plus élevées, explique le Groupe.

     

    The four projects as well as the much publicized ALU China contracts are indicative of the on-going ALU business/product initiatives that have led the Garner Group to label as Alcatel-Lucent as a "Visionary" in the Communications Equipment Industry including the Industry's key LAN & WAN infrastructure sub-secto

     

    ALU indeed is a product development leader among its competitors Cisco, Aruba et al. A merger with Nokia and its complementary communications infrastructure activites would create a firm that no other entity could match for a long time.
    14 Oct 2013, 05:26 PM Reply Like
  • dwdallam
    , contributor
    Comments (6563) | Send Message
     
    Gen

     

    "ALU is cooperating . . . ."

     

    "Cooperating" isn't the same as "has contracts with."
    14 Oct 2013, 05:35 PM Reply Like
  • JoseV
    , contributor
    Comments (397) | Send Message
     
    We will see concrete results when ALU publishes its Quarterly Results at the end of this month.
    14 Oct 2013, 06:01 PM Reply Like
  • gsimo
    , contributor
    Comment (1) | Send Message
     
    can you tell me where you got this barclays report from? interested in reading it
    15 Oct 2013, 01:09 AM Reply Like
  • DLKalpha
    , contributor
    Comments (3) | Send Message
     
    I fail to see the benefit of merging the wireless part of ALU with NSN. Their product portfolios have a 90% overlap. After the merger, both product lines would need to be maintained for some time not to lose the customers (no real synergies). Swapping out ALU equipment by NSN to really get synergies would cost more cash than NSN has (ALU has hundred-thousands of base station sold), plus would expose the accounts to other vendors (if swapping, why not with someone else ...).

     

    Interestingly, when reading such blogs it seems nobody has a much more beneficial merger on the radar screen: Cisco, since some time, announces to extend towards wireless and has already started to buy some smaller players. Buying the wireless line from ALU would push them at least 5 years ahead in their plans, and they would not have the problem with overlapping product lines.
    15 Oct 2013, 01:46 AM Reply Like
  • JoseV
    , contributor
    Comments (397) | Send Message
     
    NSN and ALU have complementary products and very little overlap. On what basis do you contend otherwise? You are right about Cisco being way behind ALU and that is another good reason for an ALU and NOK merger.
    15 Oct 2013, 03:10 AM Reply Like
  • DLKalpha
    , contributor
    Comments (3) | Send Message
     
    Sorry, maybe I was not clear: I am talking about NSN taking the WIRELESS business line of ALU, but not ALU completely.

     

    I am in this industry and know a bit about the products of NSN and ALU. In the wireless domain, the overlap is roughly 90% (they directly compete with each other). The only complementary part would be small cells, where ALU is way ahead of NSN.

     

    With Cisco, in the wireless domain there is no overlap, would be nicely complementary.
    15 Oct 2013, 01:55 PM Reply Like
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