Nokia and Alcatel-Lucent Sign MOU

Nokia and Alcatel-Lucent say they have entered into a memorandum of understanding under which Nokia will offer to buy all of Alcatel-Lucent’s equity shares through a public exchange offer in France and the US. The all-share deal values Alcatel-Lucent at €15.6 billion.

Nokia said that the combined company would create “an innovation leader in next generation technology and services for an IP connected world”. This development of future technologies would include 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging.

The boards of directors of both companies have approved the terms of the proposed transaction, which is expected to close in the first half of 2016. However, the deal is subject to shareholder approval and the customary regulatory approvals.

Analyst Comment

Many of us grew up with Nokia as our first cellular phone. For a long period Nokia was synonymous with the latest technology in the mobile world. It often came down to a question of Nokia or Motorola. As we know Motorola has changed hands and is currently in some kind of comeback phase as a brand from Lenovo. The Nokia mobile unit is, meanwhile, part of Microsoft and as such the remaining Nokia business was dominated by its service business.

As we just reported from MWC 2015, Nokia also has a business unit called HERE that contained all the mobile business that Microsoft did not acquire. This includes some mapping services as well as control services in the automotive field.

The above mentioned deal between Nokia and Alcatel-Lucent creates a technology company for the connected world. A company where mapping services and the like have no room. Indeed, in a related press release Nokia also announced that it is “reviewing their strategic options for the HERE business”. This means that the company is looking at what to do with this business unit. As Nokia states: “The strategic review of HERE is ongoing and it may or may not result in any transaction”. From a business perspective the HERE business would be just a small side business for the resulting technology company after the Alcatel-Lucent transaction. Selling or divesting it may be the best option for a business that doesn’t really fit in with the company’s goals anymore. Whatever the end result, this could mark the end of the consumer-related device business at Nokia.

The display world has already said goodbye to devices from Nokia after the takeover of the mobile device business by Microsoft. Getting rid of the HERE business may end all of the display-related research Nokia has done behind the scenes. If this goes through as it appears, Nokia may be giving up all its display-related activities. That means one less company to further the display industry. – NH