Introduction:
On December 2nd, Nokia shareholders overwhelmingly approved the acquisition of Alcatel-Lucent . The only remaining full service telecom equipment company in either North America or Europe is being sold to Nokia in a 15.6 billion Euro (€) deal which could make the “new Nokia” a market leader in network equipment and cloud services for telecom wireless AND wireline networks. The only other full service telecom suppliers left are Huawei and ZTE from China.
In October, Nokia said it would pay € 4 billion to shareholders as the company raised its outlook for the year. Nokia will hold 66.5 % stake in the new Nokia company. Alcatel-Lucent will hold the remaining 33.5% stake.
We believe the new Nokia faces increased competition from both Huawei and the Ericsson-Cisco partnership. Perhaps, more important is the challenge they and all network equipment makers will face from the megatrend of Software Defined (SD)-WANs and disaggregated systems, as discussed in follow up articles.
The former includes SDN, NFV and various other industry initiatives to use generic or commodity hardware with most (if not all) of the networking intelligence in software.
The latter takes advantage of commodity hardware for basic networking functions (e.g. switching/routing, transport, line termination, etc) and open source software for higher layer functions such as route/path calculation, (re)-configuration, OAM, fault isolation and restoration, etc.
Nokia’s Market Position:
Currently, Nokia is the third largest network equipment manufacturer after Ericsson of Sweden and China’s Huawei. Dell ‘Oro group says that Huawei has now surpassed Ericsson as the #1 provider of wireless network equipment, according to a recent WSJ article. [Huawei has been shut out of the U.S. market after a congressional report deemed it a risk to national security. The company has strong sales in Asia and Latin America and is the #1 smart phone vendor in China.]
Following the sale of its mobile phone business to Microsoft, Nokia’s focus is wireless telecommunications infrastructure and mapping services. Last August, the company sold its digital mapping business to German carmakers BMW, Audi and Mercedes for approximately € 2.5 billion. That made it a pure play wireless telecom gear maker till the Alcatel-Lucent acquisition closes.
Rajeev Suri, Nokia’s CEO, said he was delighted by shareholders recognizing the “long-term value creation opportunity” of the deal, which is expected to close during the first quarter of 2016. “I feel quite confident because as we have seen we have broad shareholder support, support from costumers, regulators, government and so on. There’s broad support overall for the deal,” Suri said.
“Nokia’s shareholders have today shown the full extent of their support for our proposed combination with Alcatel-Lucent. By ratifying the transaction in such great numbers, they have endorsed our strongly-held belief that the combined company will be better positioned to compete as a world leader in network technologies over the long-term,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors.
Click to read part 2, Competition for the New Nokia
