Can Nokia Corporation (ADR) (NYSE:NOK) Succeed Without Alcatel Lucent SA (ADR) (NYSE:ALU)?

Posted by Lynn Eisler September 27, 2013 0 Comment 3359 views

In the wake of the Microsoft deal, Nokia Corporation (ADR) (NYSE:NOK) board executives are on a warpath to strategize and develop a new development plan for the company. Reliable sources say that the company is considering a deal with Alcatel Lucent SA (ADR) (NYSE:ALU). Nothing is official and no talks have commenced with the latter.

The expansion plan

Some inside sources are of the opinion that this proposition will not be an easy one for Nokia Corporation (NYSE:NOK) while others are pointing to the fact that Alcatel carries significant restructuring risks. Very recently, Nokia Corporation (ADR) (NYSE:NOK) bought the balance stake in NSN for an amount of €1.7B. If the Alcatel Lucent deal reaches fruition, Nokia Corporation (ADR) (NYSE:NOK) will seek to expand its mapping-software segment and its wireless networks.

Alcatel Lucent SA (ADR) (NYSE:ALU) came into existence in 2006 post the merger between the French biggie Alcatel and Lucent Technologies which was previously an arm of AT&T equipment. Since then, the company has been on a financial downtrend. In the Q2, there was a €885M rise in its net loss. This was largely due to restructuring and impairment charges. Currently, the company is in efforts to cut €1B in costs and it wants to shift its focus on profitable products and segments.

The possible benefit

At a cursory glance, it may seem like Nokia Corporation (NYSE:NOK) is taking on a major risk by considering a partnership with Alcatel Lucent SA (ADR) (NYSE:ALU), but the fact of the matter is that the latter has some lucrative contracts with some of the largest players in the global market. It has contracts with companies such as AT&T, Verizon Wireless and China Mobile.

And so, with everything taken into account and the potholes kept in sight, Nokia Corporation (NYSE:NOK) might just stand to gain if it decides to go ahead with the Alcatel-Lucent deal. In Thursday’s trading session, Nokia Corporation (ADR) (NYSE:NOK) stock rose by 0.15% and closed at $6.64.

About Lynn Eisler

Lynn Eisler is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments. Lynn has been honored with the H.L. Mencken Award for Investigative Reporting, the Champion of Justice Award for reporting on the drug war, and the John Hancock Award for business reporting. Lynn was also a Knight Medical School Fellow at the University of Michigan.

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