Summary
The collapse of the giants of the traditional North American telecommunications equipment industry - every bit as catastrophic as that of GM and Chrysler - raises serious questions about many of the business practices, ideas, and motivations that have had devastating impacts upon the competitiveness (and ultimately viability) of North American-based firms compared both to Europeans and in competition with new players from China. For NSN the key to this acquisition is access to Nortel's CDMA customers, which places a premium upon those Nortel staff who have the related relationships and network knowledge.
Analysis
If the Nortel breakup takes place as now seems almost certain, the question still remains of how well and effectively the various acquirers will be able to exploit the engineering talent and sales and marketing resources of its remaining staff. In the case of NSN and Nortel's CDMA and LTE assets, NSN's goal is to build its position in North America (which has been zero with Nokia itself and limited with Siemens) with key clients such as Verizon Wireless, Sprint Nextel, BCE etc. But it will face strong competition from Ericsson, Alcatel-Lucent, and Huawei. If the rumored network outsourcing deal between Sprint and Ericsson materializes, then acquiring Nortel's assets may not give NSN much advantage for future contracts with Sprint. Nortel itself had not done well in securing either WiMAX contracts with Sprint (WiMAX was once a thrust at this ill-fated and ill-managed company), or with initial LTE contracts with Verizon Wireless, although in the latter case concerns about Nortel's future may have contributed to its exclusion from the first round of Verizon Wireless's LTE vendor selections, in which NSN secured a hand in Verizon's IMS architecture. It should also not be forgotten that Huawei has built a bridgehead (with HSPA) into two key Canadian CDMA clients (Bell Mobility and Telus) and can be expected to vie aggressively for their future LTE contracts. NSN's main interest lies in Nortel's CDMA customers, which therefore makes Nortel staff with these relationships and network knowledge the most valuable elements in this acquisition. On the broader long term front of the competitiveness of North American-based firms in global markets - notwithstanding the formidable presence of Cisco in network equipment markets - the demise of Nortel and Lucent, and the precipitous decline of Motorola, raises concerns about the toxic and sometimes fatal impact of U.S. business practices in many sectors of the economy (which Nortel followed while Canadian banks did not emulate their U.S. counterparts) that led to exaggerated short term incentives and encouraged and rewarded in some instances outrageous financial chicanery to the neglect of long term activities such as R&D. Ericsson also suffered from some of the same behavior - e.g. excessive vendor financing - but avoided the worst excesses perpetrated by Lucent and Nortel, so that it has until now been able to recover from the damage it suffered in much better shape than its North American counterparts. As in the financial sector, so in "high tech" and other sectors of the U.S. economy, it is still an open question whether there will be a fundamental transformation in the attitudes and culture, or in the incentives and influences, that drive the decisions of senior executives and Boards, or whether they will rapidly lapse back into the mantra of "shareholder value" to the exclusion of everything else, and even in the worst cases of doing anything to generate short term revenues and profits on paper on the grounds of "if it's technically legal or not manifestly illegal, then it's O.K. regardless of any other considerations."
