Nokia is reportedly considering a merger or sale of assets as it struggles to find a path to profitability as the market transitions to 5G.
The Finnish network giant competes with the likes of Huawei, Ericsson, Cisco and Samsung in the 5G equipment sector, and believes its end-to-end capabilities are a key differentiator.
The company says procuring equipment, software and services from a single vendor can reduce total cost of ownership by more than 20 per cent and reduce time to market by at least 30 per cent when compared to a multi-vendor strategy.
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However, the high cost of developing 5G technology and intense competition in the sector has resulted in the firm cutting its financial outlooks and pausing dividends in recent times. Shares have fallen by a third in the past year and there is pressure on CEO Rajeev Suri to act.
According to Bloomberg, the discussions are ongoing and might not lead to any major developments. However a possible merger with Ericsson, or a partnership in certain business areas, has been touted. Other options include shifting investments and making balance sheet adjustments.
Nokia declined to comment on the reports.
If Nokia were to seek a full sale, then it would need to attract the attention of a suitor in the wider technology sector or beyond if Ericsson wasn’t interested in a transaction. However one firm that has ruled itself out is Cisco.
US Attorney General William Barr has suggested government or a leading US tech firm could buy all or part of one of Ericsson or Nokia in order to fill a strategic vacuum. Responding to the comment, Cisco said it had no plans to invest in either firm because the lower-margin nature of the market did not suit its business model.
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