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Routing

Silly Season Kicks Off

The arrival of the wireless industry’s "silly season" was heralded this weekend by U.K. press reports linking the sale of the world’s largest handset manufacturer, Nokia Corp. (NYSE: NOK), to networking titan Cisco Systems Inc. (Nasdaq: CSCO).

As much of Europe shuts up shop for the next few weeks and heads to the nearest beach, the rumor mill is cranking into action. Sunday newspaper The Business claims that Cisco is weighing a bid for Nokia in an effort to stamp its authority on the convergence of IT networking and wireless technologies.

Nokia declined to comment on what it called “rumor and speculation,” but a spokesman for Cisco was keen to distance the company from such a notion. “If you look at the companies we acquire they all tend to be small, niche organizations that we buy for the technology and engineering in that specific area. Our acquisition strategy is certainly to look at smaller, more niche companies.”

"Small" and "niche" are two words that could not be used to describe Nokia. The company has a reported market value of around $71 billion, and it's the world’s largest manufacturer of handsets and a major player in the cellular network infrastructure business.

Analysts have been quick to dismiss the idea of a deal, declaring it “unlikely” in light of Cisco’s acquisition history. “Cisco/Nokia talks have been speculated before but have only produced a small enterprise VOIP solutions partnership,” write UBS AG analysts in a research note. “Charlie Giancarlo, the new CDO [chief development officer] of Cisco, may prefer a bolder M&A strategy given his new role and the Linksys deal he led. Even so, we believe he would not push for a deal with Nokia.”

“Cisco has a great reputation with acquisitions and Nokia would clearly give it additional inroads into the telco space, but you have to consider culture,” adds Peter Jarich of Current Analysis. “Culturally, the odds would be stacked against the combo of a router maker from California and a Finnish wireless vendor. Of course, given the prominence of Nokia in the Finnish economy and society, it's more than unlikely that the Finnish authorities would let the acquisition progress much beyond the rumor phase.”

Despite the long odds of an acquisition, European traders went along for the ride, bumping up Nokia’s shares by 1.8 percent at press time, to €13.06 ($16.14) per share. Cisco’s stock had risen 0.15 percent, to $19.45 per share.

Ah, summer! Roll on September...

— Justin Springham, Senior Editor, Europe, Unstrung

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