Summary
The merger of Nokia and Siemens' telecom infrastructure units may have looked good on paper two years ago. But, the merger has been anything but a success and continued loss of market share is making NSN look like another Nortel in the making, followed closely by ALU.
Analysis
Nokia and Siemens combined their telecommunications infrastructure units in 2007 as part of the industry's consolidation. However, the merger has been anything but success when the combined entity, NSN, could not sustain its market share and continued to lose to emerging Chinese vendors. Now, it is rumored that both Nokia and Siemens want completely out of this JV and possibly sell the entity to other suiters. The key question is whether there is a buyer out there for the whole entity or it needs to be chopped up like Nortel.
Given that Siemens was very strong footprint, but old and dated, in the fixed line networks, it is highly questionable as whether that piece of the business has any value. Nortel has to yet unload the wireline piece of its business and all other valueable pieces went first. The only real valuable piece of NSN remains its mobile unit that is primarily a Nokia infrastructure. However, lately, it has been losing market share to Huawei and has yet to win any substantial 4G business. Loss of Nortel CDMA/LTE auction as well as metroPCS's LTE business to Ericsson were major blows to NSN and may have helped trigger this reaction. In their In a recent conversation with a top Huawei executive, it is very evident that the primary target of Huawei is NSN since they believe that Alcatel-Lucent (ALU) is no longer a major force in the telecom infrastructure and not viewed as a threat. That reflects in the 20% loss of market share for NSN in the mobile market.
Now, the big question is when ALU is going to hit the bumpy road and whether it would be forced to follow the NSN's path as well.
