Nokia: Going Cheap!

By Guy Kewney  |  Posted 2005-08-09 Print this article Print

Opinion: Cisco plans to acquire Nokia? Surely no one buys that.

I thought the report about Cisco taking over Nokia was hilarious. If the story turns out to be true, not only will I have egg all over my face, but it will be time to sell your Cisco shares. What I cant understand is why anybody took the story seriously enough to analyze it as if it might be true. Over the weekend, Ive been watching the pundits—one by one, cautiously—say that well, its "interesting" and "of course, convergence, blah blah blah" and "voice is going to be important to Cisco, and Nokia ... yadda yadda yadda."
What they mean is that they have burned their fingers before. We all have, we journalists. Someone has run a story in a rival paper. The editor has got onto our case: "This is your patch, Kewney! How could you let a big scoop like this get away from you? I want 400 words, soonest, for our front page!"
So you ring up all the people involved, and of course they deny it. Since youre a keen young whippersnapper, you write it big: "Cisco takeover is a load of dingos kidneys!" and you quote the chairman and the CEO and chief financial officer, all of whom have told you solemnly that nothing of the sort ... anyway, to cut the long story mercifully short, the day after your paper hits the streets, the deal gets confirmed. But Cisco needs Nokia like a sprinter needs a third leg. From an ostrich. Which is dying of old age. Click here to read about Ciscos acquisition of network management provider Sheer Networks. If you have gathered anything at all about my own take on the mobile phone biz, especially in Europe, it is that it is doomed. The vastly expensive, highly secure GSM (Global System for Mobile Communications) networks with their purpose-built SMSCs and MMSCs and other high-budget voice network hardware, are up against the Internet Protocol. If someone told me that Nokia was thinking of buying Cisco, Id laugh, but only because Nokias market cap is half that of Cisco, and for Nokia to buy Cisco would involve loan arrangements on an absolutely heroic scale. Actually, the same applies to Cisco buying Nokia. My financial sources would, Im sure, know about it. But thats typical cub reporter hubris, unless you have something more to go on. Your sources may know, and simply want to keep it from you. So I ask myself: Whats in Nokia that Cisco wants? A lot of outdated legacy switch gear, rapidly being replaced by new stuff which still commands a premium price, but only for as long as it has to co-exist with the old outdated crap? I suspect the explanation for the rumor may be dismally simple. Three weeks ago, I was told to stand by my phone for an "important announcement, involving Cisco and a merger with a Scandinavian company, in the voice/multimedia streaming business." That story turned out to involve the sale of Kiss in Denmark. Interesting bunch, $60 million worth, going to be rolled into Linksys (a Cisco subsidiary) to provide multimedia streaming over wire and wireless for the home "digital lifestyles" market. To suggest that Nokia has somehow acquired technology in voice and wireless which Cisco lacks is to suggest that Cisco wants to get into GSM or CDMA (Code Division Multiple Access). No, I dont think so. Ive seen Cisco do some very strange things, but not that strange. Oddly, the only part of the deal that I find halfway plausible is the bit that everybody else has rejected. I find the idea of that irritating Nokia ring tone, coming out of a Cisco handset, bizarre; but the fact is, if there is a section of the communications market that Cisco has no share of, its the handset business. But frankly, to buy the market leader at a point where everybody is saying: "It cant last, can it?" would be mad. Read details here about Nokias struggles in the mobile handset market. The argument has been put up: "Well, Cisco has bags and bags of cash!" Yes, it has; about $5 billion, which is not just supermarket change. And Nokias big-iron switch business turns over more than $8 billion a year. Cisco will continue to buy small, innovative companies with interesting IP in IP (intellectual property in Internet Protocol, if you will pardon the phrase) and in six months, Im sure well discover what was really behind this story—and it may be the acquisition of another small, innovative Scandinavian company, perhaps in the VOIP (voice over IP) SIP (Session Initiation Protocol) phone business. After all, there are lots of them to buy! But what Im sure is that it wont be that Cisco has discovered that Nokia is really worth $5 billion, and snapped it up at a car boot sale where nobody else spotted it, or recognized what it was... And if it turns out Im wrong, oh, well... it wont be the first time, will it? Contributing columnist Guy Kewney has been irritating the complacent in high tech since 1974. Previously with PC Mag UK and ZDNet UK, Guy helped found InfoWorld, Personal Computer World, MicroScope, PC Dealer, AFAICS Research and NewsWireless. And he only commits one blog—forgiveable, surely? He can be reached at Check out eWEEK.coms for the latest news, reviews and analysis on mobile and wireless computing.

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