More mergers might follow

It has nothing of the drama and baggage that brought together Alcatel with Lucent, but the deal has the same air of inevitability as the acquisition of Marconi by Ericsson late last year. Wireless may represent a huge growth opportunity, but a great way to get at those wireless customers is through the existing wireline market served by the telcos.Although it will undoubtedly benefit from the deal, there is a reason Nokia’s name will appear first on the combined entity’s letterhead. Siemens has been in freefall for some time. It couldn’t get the wireless handset market right, which is why it dumped it on BenQ. Apart from its ill-fated foray into video game devices, Nokia has a credible brand, top-notch products and a reputation as a market leader in wireless. Siemens will provide it a means to avoid further costly investment in its own telecom equipment division, and a bigger opportunity to capitalize on trends in mobile and fixed communications.Its acquisition last year of Intellisync, for example, provided Nokia with the ability to both compete with and partner with firms such as Research In Motion for the enterprise mobile customer set. Now it can provide companies such as Bell and Telus the tools to help customers move data wirelessly along with equipment that will hopefully be finely tuned to interoperate with those tools. This is not unlike the utopian dreams of converging content with distribution networks during the dot-com days. Vendors want to have their wireless device enthusiasts and the equipment to attract network operators that manage them too.
This is a mature enough part of the industry to have a Big Three, and that’s exactly what the Nokia-Siemens deal brings it. Whether it catalyzes others to follow their lead is another matter. Cisco makes lots of acquisitions, but chief executive John Chambers has been coy about uniting with Nortel. Some financial analysts have pegged Motorola as a more likely partner, and given the recent launch of the Moto Q I have to agree. Nortel, which is the company Canadians are most likely watching amidst this consolidation, is still in recovery mode. It is not ready to take on a merger of this size, and would be more likely to fade into the shadows of a more successful player. Its potential suitors could include Samsung or Juniper, but no one is buzzing about the likelihood of such a combination the way they were with Nokia and Siemens.

Perhaps Nokia Siemens Networks, along with Alcatel/Lucent, will give telecommunications providers a better slate of options when they comparison shop for products and services. In the short term, however, these mergers look much more like cost-cutting moves. Nokia and Siemens, for example, estimate they will slash 10,000 jobs through the deal, which probably saves them from cutting even more had they stayed independent and at the mercy of angry shareholders. Customers will likely hold off for a while before they switch vendors entirely. It takes a long time after the vows are spoken before you know whether you’ve just witnessed the beginnings of a great partnership or simply a marriage of convenience.

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Shane Schick
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