Nokia is in the news again. The Finnish company recently announced that they intend on acquiring Alcatel-Lucent for $16.6 billion. The merger would create jobs for more than 100,000 employees and almost $27.7 billion in revenue, rivaling Ericsson. The new company is expected to keep the Nokia brand, but will also keep Alcatel-Lucent’s Bell Labs name for its R&D activities; they will also be in a position to further develop technologies such as 5G, IP and software-defined networking, cloud, analytics, and even sensors and imaging.
The move is seen by Nokia to become a major player providing networking equipment in order to compete with competitors such as Ericsson and even Chinese rivals. Huawei, for example, has almost tripled their revenue of selling equipment to telecommunications firms over the last decade, even though they have been blocked from the U.S. telecom-equipment market. According to market research firm Infonetics, Nokia has had around 17% market share in wireless networks globally in 2014, not exactly too far behind Ericsson (with 30%) and Huawei (20%). Alcatel had a 10% share, and was surpassed last year by ZTE, which now has 11% of the global market.
For Nokia, a deal like this would mean a way to gain entrance to market share in the U.S. market, where Alcatel-Lucent has roots based with Verizon Communications Inc. and AT&T Inc. Additionally, it also adds Alcatel-Lucent’s fast-growing Internet routing business, one of the firm’s profit engines that analysts are expecting for future growth. Nokia’s equipment business has since its restructuring focused solely on wireless networking.
The telecommunication equipment unit of Nokia had its share of trials and tribulations over the past years with Siemens AG, which lead to a somewhat unpopular regime of layoffs and staff cuts and restructuring to return to profit.
Alcatel-Lucent had plans for a public offering of a minority stake in its submarine networking division, known for being a leader in laying telecommunications cables beneath oceans. It’s yet to be seen if the particular IPO will continue with this new combination of Nokia and Alcatel. Nokia also separately confirmed that it might be looking to sell its HERE mapping division.