Alcatel-Lucent merger with Nokia Siemens Networks a step backwards

Tony Cripps, Ovum Principal Analyst, Infrastructure

AUSTRALIA: A merger of Alcatel-Lucent and Nokia Siemens Networks makes little sense. Both companies are still struggling to make the mergers that created their current selves work. That would be the merger of Alcatel with Lucent and Nokia Networks with Siemens.

To now merge two companies that have yet to make their previous mergers work would be a step backwards for both parties.  This is especially true for NSN which appears to be finally getting its post merger self in order. The challenges facing this rumoured merger would be immense.

One of the biggest challenges would be rationalizing the two companies overlapping product portfolios in wireless infrastructure. This is no small task as wireless revenues accounted for approximately 24 percent of ALU revenues in 2012 (14.4 billion Euros) and at least 40 percent of NSN's revenues (13.8 billion Euros).

The Alcatel Lucent merger struggled with portfolio rationalization. There is no reason to believe that an ALU NSN merger wouldn't have the same problem. ALU and NSN would also need to rationalize overlapping operator support services as well. All this rationalization of course leads to more layoffs, something that both companies are very familiar with lately, and can be a major distraction.

But, mergers as a whole can be distractions and that is something neither of these companies can afford at this time.