Street, Industry Observers Laugh At Nokia-Lucent Rumors
By JOHNATHAN BURNS
Of DOW JONES NEWSWIRES
NEW YORK -- Industry observers and financial analysts could barely contain their mirth Tuesday when shares of Lucent Technologies Inc.'s (LU) shot up more than 13% on rumors it would be bought by Nokia Corp. (NOK).
While it is true that Lucent's low stock price would make it a relative bargain, and it is true that both companies sell telecommunications equipment, it is equally true that Finnish Nokia's corporate cultural stands in almost complete contrast to such a deal.
"Look at Nokia historically," said Ed Snyder, telecommunications equipment analyst with Chase H&Q. "They've never made a big acquisition. They've never done a massive, dilutive deal."
And there's little or no evidence to suggest the company will now do otherwise, despite the best wishes of Lucent shareholders.
Lucent and Nokia officials declined to comment on the rumors.
"At their (latest) analysts' meeting, Nokia spent half their time talking about the Nokia culture, and how important it is to the company's success," Snyder said. "It would have a very difficult time maintaining that culture with such a large acquisition."
Other analysts and industry members shrugged off the rumors.
"I don't ever see (a Nokia-Lucent deal) happening," one industry official said. "When you look at the two companies, why would you want to take on the problems of Lucent if you're Nokia?"
The rumors have their roots, no doubt, in two separate phenomena: Lucent's low stock price and Nokia's premier place in the rumor mill.
In the past year, Lucent's stock has plummeted from a high of $78.48 last December to a low of $14.31 last week. On Tuesday, the Nokia rumors pushed the stock up 12%, or $2, to $18.69. Volume exceeded 46.5 million shares compared to the daily average of 25.6 million, making Lucent the second-most traded issue on the New York Stock Exchange.
Meanwhile, Lucent is at least the third company rumored to be a Nokia takeover target. Several months ago, the company was rumored to be in the process of buying San Diego-based wireless technology developer Qualcomm Inc. (QCOM). Then it was rumored to be buying Canadian-based fiber optics systems leader Nortel Networks Corp. (NT).
Obviously, neither deal has come to fruition, despite the temporary run-up the rumors caused in both Nortel's and Qualcomm's stock.
Nokia, the world's leading mobile handset maker, has had the benefit of a strong stock price in the last few weeks. That may also be fueling speculation the company will turn acquisitive. Nokia closed down Tuesday 1.1%, or 56 cents, to $49.94, with about 9.1 million shares swapping hands compared to the daily average of 13.3 million.
Nokia's stock took its biggest dip this year when it guided down expectations in the company's third quarter. At the time, investors were worried that its slipping handset margins might be a signal that the company's handsets were succumbing to price pressure from the competition.
However, the consensus now holds the company made a calculated decision to suffer lower margins in order to take greater market share.
Snyder said introducing Lucent's workforce into Nokia's would create a "gazillion" problems.
"I don't think there's any truth to the rumors," he concluded.
Added another analyst, 'The idea is almost laughable.' |
