Nokia Eyes Re-establishing Global Empire, Acquires Alcatel-Lucent for $16.6 billion

by Matt Klassen on April 17, 2015

It was almost two years that Nokia offloaded its entire mobile division on Microsoft; a move that allowed Nokia to exit a market it was clearly had no idea how to compete in, while giving Microsoft an established global footprint to grow its mobile brand. Saying nothing about Microsoft’s inability to do anything with that global presence, following the deal Nokia, for all intents and purposes, dropped off the telecom radar, with only a few quiet whispers that the company really had little left after divesting a significant portion of its business.

But apparently the rumours of Nokia’s demise were decidedly premature, as the Finnish communications company confirmed that it has finalized an acquisition deal to purchase French telecom Alcatel-Lucent in a deal worth 15.6 billion Euros ($16.6 billion). If shareholders approve the merger, the deal is set to be finalized by the first half of 2016.

While some speculate that the acquisition is intended to bolster Nokia’s telecom equipment business in an effort to establish itself as a global leader in a stagnating industry, given Alcatel-Lucent’s mobile assets this could mark Nokia’s return to the mobile industry as well, for while no details have been given the Finnish company has acknolwedged that this merger will “create an innovation leader in next generation technology and services for an IP connected world,” and that certainly sounds like mobile to me.

As a report from Reuters explains, “With about 114,000 employees and sales of around 26 billion euros, the combined company will rank a strong second in mobile equipment, with global market share of 35 percent, behind Ericsson at 40 percent and ahead of Huawei’s 20 percent, according to Bernstein Research.”

The new revamped Nokia will be able to re-establish itself in the North American telecom market, not as a mobile vendor, but as a telecom hardware vendor. Further, the merger will allow Nokia to shore up its product portfolio by adding “Alcatel-Lucent’s technology in optical transmission and Internet routers, which help telecom operators handle the ever-increasing volume of data brought on by users surfing the web on their smartphones and watching Netflix at home.”

Aside from Alcatel-Lucent’s hardware assets, however, the French telecom company also specializes in low-cost mobile handsets, a market that Nokia once dominated around the world. Given that this low end market has been once again revived with low-cost smartphones, perhaps what we’re seeing is the beginning of Nokia taking another crack at a quantity-over-quality approach to the mobile industry…there’s no question it worked once, why not once more?

But Nokia’s reinvention certainly raises its own set of questions, most notably, is there any reason to think Nokia has figured out how to compete in today’s telecom market? It wasn’t that long ago that we saw the erstwhile global leader brought low by the likes of Samsung and Apple, a humbling process that resulted in successive failures of flagship smartphones and culminated in the selloff of its mobile division, the once bright jewel of its tech empire.

Further, given that many speculated Nokia was on the cusp of bankruptcy only a few short years ago and that this acquisition is more than double the price it received for its own mobile division, one has to wonder where this money is coming from, meaning that significant job cuts and other such streamlining will undoubtedly be on the horizon.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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