Nokia Acquisition of Alcatel-Lucent? Partners Cautiously Optimistic

Finnish telecommunication equipment maker Nokia is in advanced discussions to purchase France-based competitor Alcatel-Lucent, according to a joint statement released Tuesday, in a merger that may create serious competition for heavyweights Ericsson, Huawei Technologies and Cisco Systems.

"This would make Erickson, Huawei and the new combination of Nokia and Alcatel-Lucent as the three dominant players in telecom, and also as challengers to Cisco and Juniper (Networks)," said Elisabeth Rainge, vice president of communications service provider operations at analysis firm IDC, in an interview with CRN. "Competition would definitely heat up."

On Tuesday, the two companies released a statement confirming that they are "in advanced discussions with respect to a potential full combination, which would take the form of a public exchange offer by Nokia for Alcatel-Lucent."

[Related: It's Official: Alcatel-Lucent Sells Enterprise Business To China Huaxin]

Solution providers reached by CRN saw potential in the combination.

"I think it would be great for Nokia, because it would put Nokia in a business position which they've never had before," said David Carissimi, chief operating officer at Icon Voice Networks, an Irving, Texas-based solution provider and Alcatel-Lucent partner. "Is Nokia's position on this to buy market share? Is its position to actually go out and double down on investment of what Alcatel has already done in their core fabric switching? If that's their intention, then I think this could be a boon."

Carissimi touted Alcatel as being "ahead of the market" in certain routing and switching spaces such as in the data center, and said he believes the acquisition could allow Alcatel to gain more traction against Cisco.

"Alcatel certainly has a long history and a lion's share of the development investment that they have made into a core switching fabric that's used by the vast majority of the operating companies in the United States," said Carissimi. "This could be a good thing, but we need more details [such as] what portions they're going to sell off and which portions they're going to retain."

A top executive solution provider who partners with Cisco said solution providers aren't worried about their routing and switching sales as of yet in regards to the new possible acquisition.

"If Nokia comes out and says, 'We're buying Alcatel so we can invest millions in routers,' then we'll start to seriously think about it then," said the executive, who declined to be identified. "Nokia at one time had the cellular market and good handset production, but because they didn't innovate, they didn't get into smartphones quickly enough. … But you can definitely bet Cisco is looking at this [possible acquisition], because it would create just a large company in general."

Another Alcatel-Lucent partner said he needed more details regarding the acquisition before voicing his opinion, but was cautiously optimistic.

One key question that remains is what would happen to Nokia's partnership with Cisco and Juniper if it absorbs its competitor.

"Today, Juniper is partnered with Nokia, as is Cisco, so there would be some shifts and developments in that space of which companies are most able to use a Nokia as a channel to market for their routers," said Rainge. "As Nokia would have their own, it really increasingly would be about service provider choice, because the Nokia portfolio would already include a router."

Nokia has about 61,500 employees, compared with Alcatel-Lucent's 52,000, according to the companies' websites.

PUBLISHED APRIL 14, 2015

In 2014, both companies sold large portions of their businesses.

In April, Microsoft acquired Nokia's mobile handset division for $7.2 billion in an effort to boost its presence in the mobile phone market. In October, Alcatel-Lucent sold its Enterprise business to China Huaxin for $254 million, which provided unified communications, wireless, networking gear and phone systems.

While partners are waiting for more specific details on where the acquisition will lead the two companies, Nokia made a strategic hiring of former Cisco executive Guido Jouret on Tuesday.

Jouret will become Nokia Technologies' chief technology officer -- a division of Nokia that develops and licenses innovations. Jouret spent 20 years at Cisco, leaving in May as the general manager of Cisco's Internet of Things unit, according to his LinkedIn profile.

Partners and analysts aren't holding their breath in regards to finalizing a deal between the two rivals anytime soon.

"A merger of European companies, it will take time to come together," said Rainge.