by Dave Michels

Nokia acquired Alcatel-Lucent.

What is the narrative to tell? Drastic measures to take on the Chinese? Will these vendors ever learn?

Both of these firms are well known in enterprise comms circles, but not for what they do today. Nokia is known for its once great mobile phones. Microsoft acquired that business in 2010. Alcatel-Lucent is known for its enterprise division which sells UC and network solutions. It was sold to Huaxin last year. So what do these firms do today? They sell carrier equipment – switches and cellular gear with high growth being driven by LTE. Ericsson has about 30% market share – Nokia and ALU combined represent about 27%. The two other major players are Chinese – Huawei and ZTE. Although the Scandinavians are the current share leaders, the Chinese have the growth. Huawei tripled its carrier gear in the past decade, and ZTE just surpassed ALU with 11% share.

While East has surged, West has struggled. Nokia and Siemens was a disaster (Nokia bought-out Siemens in 2013). ALU has struggled ever since it merged with Lucent. So here we go again with the together we will conquer.

The West does have an ace up its sleeve – NSA and Snowden reminded the world how much of our information is transmitting through these cellular towers. The US became so suspicious of Huawei that the vendor exited the market – still managed to triple in growth. Huawei is doing fine in North America thanks to Canada. The problem is the carriers are under a lot of pressure. Caught between low cost gear and finding a way to add value (other than being a dumb pipe) – low cost gear is winning.

This merger could be bad news for third parties such as BroadSoft and Mavenir. Presumably, Nokia will align its mobile offerings with ALU products which could love out the smaller vendors from ALU accounts such as Verizon and AT&T. Or, the opposite will happen and ALU and Nokia will get lost in merger-land and provide a new window (again) for the nimble and innovative.

The combined Finnish firm will have about 100,000 employees prior to massive layoffs that will likely ensue. In terms of revenue, the combined company will still be smaller than Sweden’s Ericsson.