Friday, 17 April 2015

Nokia and Alcatel-Lucent merger nailed to become an innovation leader

On 14 April 2015, Nokia, a Finnish company confirmed that it was in merger talks with Alcatel-Lucent, a French telecommunications equipment company. On 15 April, Nokia officially announced that it had agreed to purchase Alcatel-Lucent for €15.6 billion. Alcatel was merged with Lucent Technologies in 2006.
The acquisition aims to create a stronger competitor to the rival firms Ericsson and Huawei, whom Nokia and Alcatel-Lucent had surpassed in terms of total combined revenue in 2014. The acquisition is expected to be completed in early 2016, and is subject to regulatory approval. The Bell Labs division will be maintained, but the Alcatel-Lucent brand will be replaced by Nokia. At the same time, Nokia stated that it was evaluating strategic alternatives for the HERE mapping division, which could result in its sale.
Nokia is back in profit and Alcatel-Lucent is on its way there, but each firm is too small on its own to compete in the global telecoms-equipment market which is now dominated by two firms—Ericsson of Sweden and Huawei of China.
Nokia’s and Alcatel-Lucent’s combined turnover last year was €26 billion ($34.5 billion), more than Ericsson’s SEK 228 billion ($33 billion). Risto Siilasmaa, Chairman of Nokia says,”The merger is primarily about scope, not scale”. Both the firms are complementary to each other. Alcatel-Lucent is strong in internet routers, for example, but its wireless business is small. Nokia’s wireless-networks business, by contrast, is almost too dominant: it now accounts for 88% of revenues because the Finnish firm sold its handset business to Microsoft in 2014. Alcatel-Lucent is stronger in America, while Nokia is somewhat more Euro-centric. They could help each other make a better fist of things in China.
Rajeev Suri, President and Chief Executive Officer of Nokia, said, “The merger will lead in next-generation network technology and services, by providing seamless connectivity for people. Our innovation capability will be extraordinary by bringing together the R&D engine of Nokia with that of Alcatel-Lucent and its iconic Bell Labs.”
Michel Combes, Chief Executive Officer of Alcatel-Lucent, said,”This merger will offer a unique opportunity to create a European champion and global leader in ultra-broadband, IP networking and cloud applications. This merger will accelerate our strategic vision and give us financial strength to develop the next generation of network technology. 


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