While calmly stating that Nokia Siemens Networks (NSN) would continue with its existing strategy, the newly appointed CEO, Rajeev Suri, made plain that, out of the current five or six infrastructure vendors, NSN would be one of the three left standing after consolidation within the industry.
Suri also stressed that he saw good business opportunities in the service segment, as evidenced over the past few months with NSN winning large service deals from companies including France Telecom Orange in Spain and the UK.
This emphasis on service is timely given that NSN has forecast that equipment sales will fall by 10 per cent this year (which is lower than some other vendors), with the company reporting a Q2 gross margin of 28 per cent, down from 31.5 per cent a year earlier, while sales fell 21 per cent year on year.
The suggestion that industry consolidation is expected comes after the share price of Alcatel-Lucent jumped by around 20 per cent last week following rumours that an Asian manufacturer was on the prowl - namely Huawei or ZTE, both of which are gaining market share at the expense of NSN and Alcatel-Lucent.
While this speculation has been dismissed by both Chinese firms, the prospect of NSN merging with Alcatel-Lucent has now been floated. While this idea has been rubbished by some industry watchers, given that both firms have already undergone huge and complex mergers, Richard Windsor, global technology specialist at Nomura, painted a bleak picture for NSN, claiming, "the company is between the devil and the deep blue sea - it's neither a technology leader nor a cost leader."
For NSN, while merging with Alcatel-Lucent would give it the scale it needs to improve profits while strengthening its position in LTE technology, it could struggle to finance such a big purchase.
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