The web is abuzz with news that Cisco Systems Inc. is considering buying Nokia. The originating source is The Business, a UK weekly. The second paragraph of their article reads: "Cisco has traditionally concentrated on acquisitions of niche technology players, but chief executive John Chambers is believed to be interested in merging with a big wireless infrastructure company. Nokia has been identified as the most likely target."
Reuters has a slight update to the story; it confirmed that Nokia continued to refuse to comment.
However, even more recently the Finnish News Agency STT has reported that Nokia's Director of Communications Arja Suominen says there is no basis for the paper's story.
The web is abuzz with news that Cisco Systems Inc. is considering buying Nokia. The originating source is The Business, a UK weekly. The second paragraph of their article reads: "Cisco has traditionally concentrated on acquisitions of niche technology players, but chief executive John Chambers is believed to be interested in merging with a big wireless infrastructure company. Nokia has been identified as the most likely target."
Reuters has a slight update to the story; it confirmed that Nokia continued to refuse to comment.
However, even more recently the Finnish News Agency STT has reported that Nokia's Director of Communications Arja Suominen says there is no basis for the paper's story.
Even though an analyst quoted by The Business suggests that people are too focussed upon Nokia's position as a mobile handset provider, this focus is real:
In their 2004 Annual Account (PDF warning), a document targetted towards investors, Nokia states that their Networks division is "a leading provider of network infrastructure, communications and networks service platforms and professional services to operators and service providers." This is the "wireless infrastructure company" that Cisco wants. However, the net sales to external customers of this division was 6 367 million Euros in FY 2004, an appreciable increase from 5 620 million Euros in 2003, but still only 21.8% of total net sales to external customers in FY 2004.
Also, Nokia will not come cheaply, even though it is a smaller than Cisco, with a market cap of $71 B as compared to Cisco's $123 B, (Source: MobileTracker) Why would Cisco attempt to procure a company at such a high price where it was only interested in a quarter of it's business?
The Business also suggests that they might be some synergistic value for Nokia in a merger: Nokia may be shifting strategy from development of 3G and towards wireless local area networks (LAN) supported by Cisco, and this is true to a certain extent, with the Nokia 9500 Communicator shipping with WiFi support, and the new N91 expected to have WiFi support, not to mention the Nokia 770 tablet; but all this is merely part of a wider industry shift because of the ubiquity of WiFi networks in the home, and the high availability of WiFi in competing devices.
Indeed, there is definitely a synergistic link between mobile handsets and the wireless infrastructure which Nokia currently sells, but almost none between mobile handsets and the wireless infrastructure which Cisco sells; at least until WiMAX arrives on the scene.
The idea that Nokia might sell it's Networks division alone is possible; rumours of such a sale also surfaced around this time last year (no link, sorry), the network division has not been doing as well as it's chief competitor Ericsson, with only a 6% sales gain compared to a 18% revenue gain by Ericsson's equivalent division, and analysts worry that growth in networks will slow in coming years, as the worldwide upgrade to third-generation (3G) networks starts to tail off. Of course, this would mean that Nokia would be concentrated fully upon handsets, and with average prices falling this is a hard time to be in that business alone. (Source: Business Week)
I suppose we'll see, but without positive confirmation from Nokia (or at least a retraction of Arja Suominen's statement), don't hold your breath.
