Nokia, Alcatel-Lucent to Create Networking Giant
The deal—which will create a company with a combined market value of about $40 billion, large enough to challenge market leader Ericsson and others—also could help drive down prices by heating up competition in the space and could lead to more consolidation as other vendors look to strengthen their positions. The acquisition is squarely focused on the telecommunications space, ZK Research's Kerravala said, noting that Alcatel-Lucent sold its enterprise business last year. Telecoms and communications service providers are under increasing pressure to provide a seamless wired and wireless experience to end users who want connectivity anywhere they are, on any device and at any time. Service providers are turning to such technologies as software-defined networking (SDN) and network-functions virtualization (NFV) to create more flexible, agile and programmable networks to address those demands. While touting the size and strength of the new company, officials for both vendors also talked about savings that will come with the merger, from $212 million in interest savings by 2017 to $957 million in operational expenses reductions by 2019. Kerravala said a challenge with any such large acquisition is integrating the two companies together, from the cultures and employees to the product portfolios.Nokia and Alcatel-Lucent officials made sure to stress that the new company will have a strong presence in Alcatel-Lucent's home base of France, where government officials reportedly want assurances that the country would continue to have an influence over Nokia Corp. In a statement April 15, the vendors said France "will be a vibrant center of the combined company. Nokia intends to be an important contributor to the overall development of the broader technology ecosystem and a driver of innovation in France." That includes housing research centers around 5G, small cells and cyber-security in France, as well as continuing the work of Bell Labs in the country. In addition, Nokia will create a $106 million investment fund to fuel startups in France that focus on the Internet of things and the industrial Internet.
"These are very, very complementary companies," he said. "There's obviously some overlap, though it's small, and if you look at where they do overlap, one company will have one product that is clearly superior to the other."