By Juhana Rossi
HELSINKI-- Nokia Corp. has emerged as the possible engine behind
the creation of a telecommunications-equipment titan only years
after it was regarded as the laughingstock of the tech world for
missing the touchscreen revolution that thrust smartphones into
billions of palms around the world.
Nokia said Tuesday it was in advanced talks to buy French rival
Alcatel-Lucent SA, a deal that could allow the Finnish company to
surpass China's Huawei Technologies in annual revenue and possibly
steal the networking-industry's no. 1 crown from Sweden's
Ericsson.
If completed, a merger with Alcatel-Lucent would mark the second
time the company has reinvented itself in the past decades,
extending the saga of a 150-year-old corporation that has put its
Nordic home country truly on the global map.
Analysts said a merger with Alcatel-Lucent carried big risks for
Nokia, notably because of the difficulty to combine different
cultures. Alcatel-Lucent itself was formed through a 2006
Franco-U.S. marriage that had a tumultuous start and yielded years
of losses.
"Even if everything works out reasonably well, combining the two
companies will take a couple of years," said Sami Sarkamies, an
analyst with Nordea Bank in Helsinki.
Nokia, which started as a wood pulp mill in 1865, first grew
into a diversified conglomerate that made everything from rubber
boots to television sets and forest products.
In the 1990s, however, Nokia faced heavy losses and opted to
focus on mobile handsets and network technology, selling the bulk
of its legacy operations. The overhaul made wonders: By 1998 Nokia
was the world's largest supplier of cellphones, and in 2000, its
EUR300 billion ($317 billion) market capitalization made it one of
the world's most expensive companies.
At that time, Nokia's engineers developed a cellphone prototype
with a touchscreen set above a single button. But the product,
crafted years before Apple Inc. rolled out the iPhone, didn't hit
the shelves, because Nokia doubted it had market potential.
The decision proved a painful corporate blunder: By 2012, Nokia
ended a 14-year-run as the world's largest maker of mobile phones
as rival Samsung Electronics Co. took the top spot. Nokia again
bled red ink while the group's market value melted.
Nokia made a last-ditch effort to revitalize its mobile device
business by striking a partnership with Microsoft Corp. in 2011.
The goal was to combine Nokia's hardware with Microsoft's Windows
Phone operating system and to create a competitive alternative to
Apple's iOS and Google Inc.'s Android platforms.
This attempt failed, and as losses mounted, Nokia decided to
sell its handset business to Microsoft for EUR5.4 billion in
September 2013.
Nokia was left mainly with its networking business, which the
group had combined with that of Siemens AG in 2007. Siemens, which
was anxious to exit the joint venture, sold its interest in the
business to Nokia for EUR1.7 billion in July 2013.
The network unit "was overshadowed by the handset business,"
said Hannu Rauhala, a tech analyst with Pohjola Bank in Helsinki
and a former Nokia employee. "Nevertheless, it was continuously
being developed."
Together, Nokia and Alcatel-Lucent had 2014 revenue of EUR25.9
billion and more than 100,000 employees in businesses spanning
wireless communications and Internet routing.
On top of its main network equipment business, Nokia has a
digital location and mapping unit known as HERE, and a unit
managing its patent portfolio.
Write to Juhana Rossi at juhana.rossi@wsj.com
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