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OSS

Matchmaking NSN

7:05 AM -- Speculation about a potential merger between Alcatel-Lucent (NYSE: ALU) and Nokia Networks has increased again recently as both vendors try to restructure their way out of trouble. AlcaLu CEO Ben Verwaayen has countered that speculation this week as he discusses his company's current challenges. (See Alcatel-Lucent: Too Little, Too Late?)

But for those interested in NSN's future, you should check out the excellent analysis of potential suitors by Heavy Reading Senior Analyst Patrick Donegan. He argues that of all the possible partners -- including Ericsson AB (Nasdaq: ERIC) and Samsung Corp. -- NEC Corp. (Tokyo: 6701) is the most likely to make a move. There are a number of reasons why that makes sense. (See Who's Going to Buy NSN?.)

Donegan makes a great case for NEC from a macro-economic, cultural, historical and technology perspective. But, digging a bit deeper, there's another reason the NEC/NSN combination makes sense -- it's to do with Service Provider Information Technology (SPIT).

Modern communications equipment vendors can't get by with just great network equipment any more. They need a services (consultancy, systems integration, managed) element, strength in telecom software and IT systems (OSS, BSS, cloud platforms and so on) and global reach and scale.

The strong market leaders, Ericsson and Huawei, have recognized this -- that's why Ericsson acquired Telcordia. NSN also believes this: Its renewed focus is on mobile broadband systems, professional services and Customer Experience Management (CEM), an increasingly important strand in the SPIT sector.

But NSN's broader SPIT story lacks breadth, especially in terms of a broad OSS, BSS and cloud services support systems portfolio. As a major IT/cloud systems vendor, NEC would be a great parent to help NSN be a stronger IT transformation partner to communications service providers (CSPs).

And in building the telecom software side of its portfolio, NEC has shown an appetite for acquisitions. In June 2008 it bought OSS firm NetCracker for US$300 million and subsequently merged it with its existing telecom software assets to create a SPIT giant. Then a few months ago it splashed out $449 million to add billing, customer care and revenue management capabilities to its portfolio by acquiring Convergys Information Management. (See NEC to Buy Convergys Unit for $449M and NEC Shells Out $300M for NetCracker.)

NEC also has a strong mobile backhaul product line that would fill a hole at NSN, which sold its backhaul unit as part of its restructuring process. (See DragonWave to Buy NSN Unit.)

And it's a leading force in one of the most exciting areas of networking development -- software-defined networking (SDN). (See NEC Enhances OpenFlow-based SDN Fabric.)

There are, then, a number of factors that favor a NEC/NSN tie-up. As Donegan points out, such a move would "take a marked break in NEC's corporate culture," but as he also notes, stranger things have happened.

— Ray Le Maistre, International Managing Editor, Light Reading

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Soupafly 12/5/2012 | 5:24:45 PM
re: Matchmaking NSN

Ray; Lets be clear here.


Anyone that I can think of who would or could buy NSN would definitely engage in some level of asset stripping or "optimization" activity. If that were not the case.


a) The company would not be in the shape its in right now. (Incompetent & arrogant management aside.)


b) It would already have been sold or be trading as part or a larger group.


The parents & politicians want to maintain the union but to me they are a ghost company that like the titanic is holed below the waterline. They have great staff & good tech.


BUT! They also have arrogant & weak management who thought they were better than global competitors and today they appear to have a limited ability to differentiate, now that those competitors have caught up.


Breaking news today; http://www.theregister.co.uk/2...


Its just a small shift (imho) for this "alliance" to go after a infra-structure player. NSN would be on that list.

digits 12/5/2012 | 5:24:51 PM
re: Matchmaking NSN

Re Soupafly's suggestion of Dimension Data...


That an interesting idea but ultimately that would mean NTT buying NSN, as DiData is now part of the NTT Comms group..... there would need to be some asset stripping and a lot of restructuring to make that fit, but the combo of NSN Services + CEM with DiData is an interesting combo.


 

Mr Finance 12/5/2012 | 5:24:52 PM
re: Matchmaking NSN Utopian principal of M&A is the competent management team creates more value, allowing it to fund takeover and turnaround of under performing assets. Some may argue it's a stretch to call NSN's management competent, but they look like Steve Jobs in comparison to the team at NEC who lost the same global 3G RAN share that Nokia had at the time of merger and who have totally failed to build a services play. As Seven says, such a combo with NEC in charge is unlikely to end well.
pdonegan67 12/5/2012 | 5:24:53 PM
re: Matchmaking NSN

Can't agree with you there, I'm afraid. I can't see the bulk of NSN giving Cisco or Juniper anything much besides margin dilution.

allip 12/5/2012 | 5:24:53 PM
re: Matchmaking NSN

NSN might be a good fir both Cisco and Juniper who have been gearing up to enter


the 4G wireless infrastructure market..

Soupafly 12/5/2012 | 5:24:53 PM
re: Matchmaking NSN

What about Dimension Data?


Are they so outlandish......?

paolo.franzoi 12/5/2012 | 5:24:56 PM
re: Matchmaking NSN

 


I would say that it might be so...and NEC would be the last buy that happens.  Imagine what happens at NSN when every senior manager in the company is fired to be replaced by a Japanese manager.  Should be a great sport to watch them wipe out the dirty gaijin.  :)


 


seven


 

pdonegan67 12/5/2012 | 5:24:58 PM
re: Matchmaking NSN

Historically I would agree with you but I think Japan's business culture with respect to international M&A may be changing faster than you think.


The barriers to undertaking a huge deal of this kind are lower than they were a couple of years ago and they may be set to go lower still.


That doesn't make NEC a shoe-in for this deal. But it does means they are a much more plausible candidate for this than they would have been just two or three years ago.

paolo.franzoi 12/5/2012 | 5:24:58 PM
re: Matchmaking NSN

At least the bit about culture.  The Japanese are really not big on any acquisitions and large ones are very out of the norm.


I think that breaking up these firms and selling off some pieces seems the right thing.  They don't seem to understand portfolion management at all.


seven


 

pdonegan67 12/5/2012 | 5:24:59 PM
re: Matchmaking NSN

Can't say I agree that any of these scenarios will likely lead to the acclerated demise of the acquirer. NEC and Samsung, for example, have a lot to gain from acquiring NSN's account footprint, and potentially some of their product line too. Neither firm has the scope to aggressively leverage price and financial terms as Huawei has done to break into so many accounts.

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