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.