Could 'Nokia-Alcatel Networks' emerge after the Microsoft deal?

Nokia is weighing up its next steps after funds from the Microsoft deal improve its credit rating.

Nokia is weighing a possible "tie up" with French-American networking company Alcatel Lucent as a next move after Microsoft takes over its handset business, according to reports.

"On again, off again" talks within Nokia about acquiring Alcatel's wireless business could be back on the cards as the company ponders its growth strategy once Microsoft's planned €5.4bn acquisition of Nokia's devices and services business proceeds, according to Reuters

According to the Wall Street Journal, sources told the paper the talks were part of a board review, which has canvassed all options regarding a possible deal with Alcatel-Lucent.

Another option, according to Reuters' sources, is for Nokia to buy the whole of Alcatel-Lucent, although any deal could be months away. If it goes ahead, it would be the second major networking acquisition for Nokia: the company acquired Siemens stake in the Nokia Siemens Networks joint venture in July, making it sole owner of the business. NSN today brings in around half of the company's revenues — the lion's share of the rest coming from its devices business.

If a formal proposal were to occur it would likely happen once Nokia's credit rating improved, off the back of an upgrade in its financial position once the Microsoft deal is closed.

Such a deal could make would make it larger than industry leader Ericsson, followed by Chinese rivals Huawei and ZTE.

Alcatel-Lucent declined to comment on the speculation, but pointed to the company's June restructuring announcement for plans to sell €1bn in assets and narrow its products, as well as cut costs by €1bn in the next two years.

According to Reuters, analysts estimate Alcatel-Lucent's wireless business is worth between €1.1bn to €1.5bn.

Spokespeople for Nokia and Nokia Solutions and Networks also declined to comment when contacted by ZDNet.

Before Nokia acquired the Siemens stake, NSN's CEO Rajeev Suri predicted there was only space for "three long-term profitable companies" in networking over next few years. 

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