Quick posts 1: Nokia Acquires Alcatel-Lucent

I've been busily traveling but there are several developments that I know my readers would like my comments at least briefly, and also a place where they can then chat about it, by topic. So I'm posting a few short(ish) blog stories today about recent news past weeks and my brief comments. First up, Nokia purchase of Alcatel-Lucent.

If we look at the telecoms infrastructure world of 2001 just as I left Nokia, the seven big players in the industry were in order of their annual network equipment sales: Ericsson, Lucent, Nokia, Siemens, Nortel, Motorola and Alcatel. Nokia itself had in very rough terms a half-way split in it business between the fast-growing handset business and the more mature telecoms infrastructure business, about one third of Nokia total employees were with handsets, revenues were essentially split 50/50 and profits came 2/3 from handsets and only one third from networks. Early in my independent consulting career I remarked often that the telecoms infra market had too many players and we would be seeing consolidation as the big 3G related growth stage passed.

And so it was, Nokia got into a joint venture with Siemens, eventually acquiring that networking business. Alcatel bought Lucent. Ericsson acquired most of the assets of Nortel piece-meal. Nokia bought the Motorola networking business that had gone bankrupt and thus those seven were down to three. Now with the Alcatel-Lucent acquisition, Nokia brings that set down to two, and one wonders will some day come when Nokia would then acquire the Swedish based Ericsson or do some merger there. Now, in the interim, two strong Chinese networking equipment providers have emerged, of course, Huawei the larger and ZTE the smaller of those two. Huawei is about the size of Ericsson or the new Nokia-Alcatel-Lucent.

So now Nokia is essentially the networking businesses combined of Nokia-Siemens-Motorola-Alcatel-Lucent. And by that score, Ericsson is combined Ericsson-Nortel. Just a fascinating observation of free market dynamics at work.

Three quick observations here. First, remember my 'dream scenario' of Nokia re-acquiring the handset business back from Microsoft? Or the equally wild Sony Xperia unit? Those were quite wild ideas, but now, clearly, at least Nokia had been in the market to spend some of its cash and clearly wanted to acquire something. I'm also pretty sure that they probably won't buy anything else for now, as they now prefer to focus on making the Alcatel-Lucent acquisition work (like they turned around the loss-making businesses of Siemens networking and Motorola networking before). 

Secondly, there are still rumors Nokia wants to divest the Here mapping and location-based services business. I told you right from the start, when then-CEO Stephen Elop announced his passion for Here and maps, that it was a losing proposition, and rather obviously now it can be seen, that it also was. So yeah, they will probably unload that hopeless mess to some unsuspecting victim from the West Coast who still believes in maps and location haha.

Lastly Nokia handset return? There are increasing rumors that such a project is indeed under way, obviously on Android. The first Android based N1 tablet has been quite successful in China, a market that greatly loved/loves the Nokia brand and was so poorly served by the Windows Lumia experiment. Expect Android Nokia smartphones to be tailored to fit Chinese needs particularly well and probably aim more for high-end than low-end initially.

So lets next talk about the misery at Microsoft's Lumia division..

Comments

[E.Casais]

With 4G, and later 5G which is already being discussed, we are moving towards networks based entirely on IP.

Apart from the veterans (Nokia, Ericsson) and challengers in telecoms (ZTE, Huawei), what could be the role of firms like Cisco -- or even Google, if Google starts building its homebrewn wide-area networking gear, just as it already builds its own server infrastructure instead of procuring it from the likes of HP and IBM?

[cornelius]

Alcatel makes some Android phones. Will Nokia be able now to sell Android phones under the Alcatel brand?

[RottenApple]

I don't think that these are the same companies anymore, despite sharing the same name.

[Tomi T Ahonen]

Hi E, cornelius and Rotten

E - true but the vast majority of cellular telecoms infra costs are the cellular network part, the towers, the base stations etc. That is where most of the money is and Cisco or others would be in a very tough position to break into that business. But yeah, parts of the network most definitely yes.

cornelius - Alcatel sold the business to TCL of China who licence the Alcatel brand. So there is nothing here for Nokia. Meanwhile TCL bought recently the Palm brand to give it branding differentiation (at the premium end) so they may also be moving away from Alactel or the branding licence might be ending soon. Note that I just blogged about the news Nokia will return in 2016 on its own phones running on Android.

Rotten - thanks yeah you're right.

Tomi Ahonen :-)

[Nokia Supplier]

Hi Tomi, Hi guys.

Any ideas of how the Nokia-Alcatel-Lucent merger will go ?

I know both companies and they are very different. Nokia Networks is lean, decentralised. It has been profitable for a couple of years.
Alcatel-Lucent is more traditional and over staffed and losing money.
How are they going to handle the large French staff?

On a different note, is being an integrated infrastructure supplier (mobile + backhaul + fixed) relevant?. What I have seen is that integrated projects are very rare. Operators update their networks slowly, element by element. year by year.

Cheers.

[AtTheBottomOfTheHilton]

This is a very dangerous move by Nokia. The French government will likely have some demands that they will not fire too many French workers etc. This can lead to that Nokia ACL will have a too large organization for several years to come eating up their profits.

Expensive deal that can become even more expensive in the end.

[AndThisWillBeToo]

@Tomi
"I told you right from the start, when then-CEO Stephen Elop announced his passion for Here and maps, that it was a losing proposition, and rather obviously now it can be seen, that it also was."

That "losing proposition" has now been judged worth $3 billion as Uber offers that much and we haven't even heard how much German car makers plan to throw on table:
http://nyti.ms/1KPVjih

I guess it rather obviously now can be seen as such.

[Catriona]

@AndThis, Nokia paid $8 billion for Navteq back in 2008.