Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V)’s board of directors have internally discussed a possibility of an alliance with Alcatel Lucent SA (NYSE:ALU) to explore more options after the deal to sell its handset business to Microsoft Corporation (NASDAQ:MSFT), says The Wall Street Journal, citing people familiar with the matter. Nokia’s board of directors discussed the future strategy plans and other matters last week.
Spokesman of both companies have refused to comment on the matter.
Nokia exploring future business strategy
The internal discussions among the board are a part of a program to develop a future business strategy for Nokia, post Microsoft deal. The sources told that the board has looked into all possible options related to a deal with Alcatel-Lucent, but as of now, no official words have been exchanged with the French company.
One of the people familiar with the matter told that taking a firm decision on a future course of action won’t be easy for Nokia. Another source told that an alliance with Alcatel is not a viable option as Alcatel is seen carrying “large restructuring risks.”
Recently, the Finnish firm acquired the remaining stake in the NSN wireless networks venture for €1.7 billion. With a possible deal with Alcatel-Lucent, Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will now want to focus on expanding the wireless networks and mapping software segment.
Alcatel-Lucent struggling, but may be useful
Alcatel-Lucent, which was created, in 2006, after the merger with between French giant Alcatel and former AT&T equipment arm Lucent Technologies, has been struggling financially. For the second quarter, net loss for the company increased to €885 million, primarily due to impairment and restructuring charges. The company is currently undergoing a restructuring process with an objective to save €1 billion in costs, and refocus on certain profitable segments/products.
Though a partnership with the French company may appear risky for Nokia Corporation (ADR) (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V), but the fact cannot be denied that Alcatel-Lucent has some valuable contracts with some of the biggest carriers globally including Verizon Wireless, AT&T and China Mobile Ltd.
Merger to create the second biggest player
Earlier this year, some of the sources claimed that French government will support the deal between Alcatel-Lucent and Nokia’s telecom-equipment business as the merger will enhance the European clout to take on leaders like Sweden’s Ericsson and the China’s Huawei Technologies.
Recently, Morgan Stanley in a report told that a merger between NSN and Alcatel-Lucent will result in the second largest player on the network infrastructure market. The combined entity will command a market share that will be marginally ahead of Huawei’s 32 percent and below Ericsson’s 36 percent. In the US market, the merged entity will hold 45 percent market share versus 50 percent for Ericsson.
