To the victor (Nokia) go the spoils

08 Oct 2015

As featured in DisruptiveViews

It should be no surprise that Nokia executives will dominate the combined company’s management team after the acquisition of Alcatel-Lucent. The wires are running hot with this ‘not so surprising’ news, despite press releases earlier this year claiming that the Alcatel-Lucent part would remain firmly rooted in France. It may, but without its senior management team it seems.

It wasn’t that long ago that the deal was being reported as a merger, the usual tactic to distract staff and stakeholders. But now the deal is done it is just called an acquisition. Perhaps takeover would have been more apt?

There is no doubt both parties, if left to their own resources, would have a limited life span as Ericsson goes from strength to strength with its network management strategy that has made the world’s largest network operator and the Chinese equipment manufacturers, Huawei and ZTE, continue to dominate in both sales and innovation.

But why would a Nokia-AcaLu marriage be any more successful than the ‘failed’ Nokia-Siemens and Alcatel-Lucent matchups? And by failed I mean that in neither case did the mergers create single entities of greater value than their component parts.

They did, however, benefit from massive staff layoffs, the quickest way to get a share price up, that helped reduce costs but did little to improve sales or develop new products. The merger between Nokia and Alcatel-Lucent is a synergy of their capabilities, technologies and markets as some experts reported, but little has been reported of the obvious overlaps.

French unions expressed concerns about job losses when the talks were first mooted and rightly so. With 50,000 staff worldwide in each company the axe will most definitely fall and it will be very sharp. Who knows what Nokia CEO Rajeev Suri said to France’s President and Economy Minister Emmanuel Macron but it must surely have been along the lines of ‘if we don’t do this there will be many thousands of job losses at Alcatel-Lucent, and if we do this there will still be many thousands of job losses, but maybe fewer.’

In September, Nokia announced it was going to partner with the French government to form a technology-focused R&D team and support the country’s communications infrastructure. Nokia said it intended to make use of Alcatel-Lucent’s existing capabilities in R&D to research cutting-edge communications technology including 5G and small cells, cyber-security and privacy, wireless transmission, optical transmission and IP platforms.

Nokia also said it was expecting to work closely with the French government to become “deeply embedded” in the country’s technology and telecom ecosystem. Nice carrot, but the 2,000 odd staff in Alcatel-Lucent’s French R&D facility may be the smoke screen for far greater numbers being shown the back door.

Suri has been given credit for the turnaround of Nokia’s struggling telecom business equipment arm helped admirably by 17,000 job cuts he announced in 2011 and the sale of Nokia’s map business to Audi, BMW and Daimler earlier this year for €2.8 billion.

Today’s announcement that 10 of the 13 members in his planned ‘leadership’ team (the word management was omitted) will come from Nokia will hardly fill the markets with joy as their performance to date has hardly been stunning in turning Nokia’s market fortunes around. Bhaskar Gorti, currently president of Alcalu’s IP platforms division must be thanking his lucky stars after jumping ship from his previous high-profile position at Oracle – he will now head up the Applications & Analytics Unit. Brilliant move is he simply blessed with brilliant foresight?

Nevertheless, we should prepare for the inevitable round of layoffs and sell-offs as the Nokia team slice into what was left of AlcaLu, after all, there is little left to cut at Nokia, right?

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