Summary
Nokia Siemen's purchase of Nortel bolsters their overall plan to expand in the US, where they have less market share than elsewhere. Purchasing Nortel gives them access to technology (CDMA) that is popular in the US but not elsewhere. It also goes along with Nokia's increasing investment in LTE, another potentially important US technology.
Analysis
Nokia is number one or two in almost all markets except the US, where it is sixth. Last week, Nokia's chairman stated Nokia's determination to increase its market share in the US. Couple this with Nokia's Q4 2008 financial results estimate of a 5% decline in worldwide telecommunications equipment, especially in European markets.
Moving into the US with this acquisition provides Nokia with two possible advantages: 1) possible increases in market share and 2) taking advantage of a burgeoning but confused US 4G wireless network market.
CDMA is widely used in the US and North America but nowhere else. There are strong indications that CDMA as a technology may be going away. (See Qualcomm's November 2008 announcement of stopping development of the next level of CDMA, for example.) However, two of the four major US carriers still use CDMA. Thus, competing in the US telecomm market means supporting CDMA. The problem for a foreign manufacturer is whether of not to expend the resources to support what may be a losing technology. By Purchasing Nortel, Nokia gives itself access to technology that can serve the US market while not forcing them to invest in technology that is not dominant (or perhaps even marketable) worldwide. This is a bigger factor than might be thought.
Additionally, the fight for a 4G wireless network standard is not over. Nokia has invested in LTE technology and has included it in its product line. LTE has strong backing from Verizon and may become a winning technology through sheer weight of numbers as Verizon expands to serve the largest subscriber base in the US. Either way, this acquisition puts Nokia in a good place to expand in the US.
