Do you think Nortel CEO Mike Zafirovski got much of a surprise this morning to read about the mega-deal between Nokia and Siemens? Many people had expected Nortel would have been involved in a merger/JV with Nokia or Siemens but, instead, Nortel has been left on the sidelines as a $19.9-billion, 60,000-employee entity called Nokia-Siemens Networks has been created. So what now, Mike Z.? Do you pursue a deal with Siemens' enterprise business given you seem so intent on Nortel becoming a viable alternative to Cisco. Do you do a deal with Motorola Inc. to create a stronger wireless (CDMA) business? Or do you try to stay independent for a little while longer while you finish fixing Nortel and hope the stock price gets a heart beat again? A key reason for the Nokia-Siemens deal is creating an entity with lower costs that can compete more effectively given Siemens and Nokia expect the Nokia-Siemens will be able to slash expenses by $1.9-billion a year. This reality is a fact of life in the telecom equipment business to deal with shrinking profit margins amid intense competition. For any player trying hoping to stay viable, they have two choices: seek deals that create major synergies and/or restructure themselves, which is the route Nortel and Mike Z. are currently taking. But at some point, Nortel may have no choice but to dance with someone. The question is whether there will be anyone left on the dance floor? For more on the Nokia-Siemens deal, check out Mathew Ingram and Om Malik.
Nokia-Siemens Do Deal. What Now, Mike Z.?