The merger of the Nokia and Siemens telecom equipment arms, which my colleague
commented on briefly, will have a number of interesting repercussions.
The first and most obvious is that this is a vote of no confidence in Nortel. There have been occasional rumours for years that Nokia would buy some or all of Nortel and looked at from a product overlap perspective (or rather lack of overlap) this would have seemed sensible, especially after the "Lucatel" deal. The fact that Nokia preferred to merge its equipment business with Siemens instead indicates the weakness of Nortel as a company, something underlined by its recent problems such as the extremely shortlived Huawei relationship and the recent announcement that it needs to go begging for cash (again).
As for Nokia/Siemens, in this blog's 3GSM report we noted that Nokia and Siemens were able to share a pillar in Barcelona and my snarky comment about the joint venture was more prescient than I anticipated. The companies report this as a "merger of equals" and the Reuter's report on it seems to think that this helps Nokia in its Wireless Equipment business. I'm sure that this is partly true but it is worth pointing out that Siemens won practically no UMTS equipment contracts, indeed it struggled to create a UMTS equipment range of its own and IIRC offered NEC equipment under the Siemens badge instead. On the other hand, even ignoring the Chinese+Siemens TD-SCDMA stuff, Siemens does seem to have better CDMA equipment, an area where Nokia has struggled in both network equipment and handsets (witness its Sanyo JV).
However, Siemens also brings to the table a lot of non-wireless telecom equipment and the Reuters report quotes an analyst saying:
"...But in wireline Nokia has no business whatsoever and it's now being tasked with turning around a business that Siemens failed to do over the last six years."
I think this is a fair point and it would not surprise me if we see significant cuts in that section of the combined business. On the other hand though, Siemens does have a good relationship with Juniper and perhaps the Finns can find a way to leverage that relationship into something that lets them create a real Cisco competitor rather than one that just competes with Lucatel and Nortel.
Updates in the extended body