Nortel could buy, or be bought, after Alcatel deal
Mon Apr 3, 2006 10:45 AM EDT
TORONTO (Reuters) - Nortel Networks Corp., one of the world's largest telecommunication equipment vendors, could be the next to buy or be bought after the tie-up announced this weekend between Alcatel and Lucent Technologies, analyst said on Monday.
French communications equipment maker Alcatel said on Sunday it would buy Lucent in a deal that creates a company to rival industry leader Cisco Systems Inc..
"We believe the geographic exposure of the combined Alcatel/Lucent represents an attractive aspect that other vendors may wish to emulate with other deals," said Prudential Financial analyst Inder Singh.
"In this light, it appears that Nortel may become more attractive as a target for other European vendors."
Prices for network gear have fallen as suppliers vie for business in a shrinking pool of customers, and companies such as China's Huawei Technologies Co. and ZTE Corp. offer steep discounts.
Merriman Curhan Ford analysts focused on Nortel as "the best value in the space and most likely to be the next player."
They said Nortel could be a buyer, a seller, or remain as a standalone, although that was unlikely. "Given the changing environment we view major strategic activity at Nortel as a near certainty," they added.
The Merriman analysts said Nortel would most likely benefit from a combination with Siemens, a deal that would make it the world's largest networking equipment supplier, and surpass the new Alcatel as the world leader in wireline, with market-leading positions in optical and VoIP.
Merriman said Motorola would also be an attractive addition to Nortel's wireless unit, and would potentially add wireline access capability as well if Motorola could be coaxed to part with it.
But Fitch Ratings, which also sees an acquisition flurry after the Alcatel/Lucent deal, said a tie up between Nortel and Siemens' communication's unit would be "quite challenging" given Nortel's weak credit profile and mixed results from the Siemen's unit.
Nortel shares were up 5 Canadian cents at C$3.62 on the Toronto Stock Exchange on Monday morning and up 4 cents at $3.09 in New York. |
