#$alu

[invest-a-bulls-blog]

Nokia (NOK) - Alcatel (ALU) Purchase

Interesting and profound prediction analysis http://www.benzinga.com/analyst-ratings/analyst-color/15/04/5410508/why-nokia-alcatel-lucent-deal-could-be-a-game-changer-fo via Benzinga iOS

[bloombergview]

Nokia’s comeback saga

No wonder Nokia now feels strong enough for a major acquisition, one that has been in the cards since 2013, when the handset-business sale took shape. At that time, Nokia backed out of a link-up with Alcatel-Lucent, a communications equipment company that was undergoing a restructuring similar to the one Suri was conducting at Nokia. Alcatel was cutting costs, getting rid of businesses that sold wired communications equipment and concentrating on newer technologies, such as Internet routing, 4G wireless and cloud computing.

Yet it wasn't clear in November 2013, when Nokia stopped looking at the deal, how well Alcatel CEO Michel Combes was doing. Now it is. Alcatel, which had bled cash for years, is profitable again, with net income of 271 million euros in the last quarter of 2014. In the final two quarters of last year, Alcatel had positive cash flow from its operations for the first time since 2012.

It isn't a spectacular recovery, but it's been good enough to ensure that acquiring Alcatel probably won't be a major headache for the Finnish company. Now, all the 2013 talk of synergies between the two companies finally makes sense to corporate executives allergic to losses, not just to analysts playing chess with other people's money.

As always with French companies under President Francois Hollande's socialist government, a cross-border acquisition may be tricky -- it isn't clear whether Nokia will end up buying all or part of Alcatel's business. Whatever it succeeds in acquiring, however, Nokia -- still Finland's highest-valued company -- will become a strong national champion again. The combined 2014 sales of Nokia and Alcatel were, at $27.4 billion, about $1 billion more than those of Sweden-based Ericsson.  Although this is still only 60 percent of the sales of U.S.-based Cisco Systems or China's Huawei,  a combined Nokia-Alcatel would be up there with the global leaders.

The equipment industry sounds unexciting from a consumer standpoint, but that may change. In a February interview, Suri explained how he saw Nokia's future:

We believe in this programmable world - machine-to-machine, Internet of things. Ultimately, there will be billions of intelligent connections, there will be cloud-based connections, and there will be billions of connected devices. If you believe in this vision, location will be an important part of the future. We are trying to build a location-based cloud business.  

This might require Nokia to keep its mapping business, called Here, whose sale it is now said to be considering. Even if the unit is sold -- perhaps to a company such as Apple, which is struggling with its own map application -- Nokia now has enough experience in reinventing itself that it won't soon crumble under the pressure of tech innovation again.

Read the full analysis at BloombergView.com.