Nokia Handset Business Goes to Microsoft, Network Business Goes It Alone

Nokia’s largest surviving segment, Nokia Solutions and Networks (NSN), had been rumored to be in talks with Alcatel-Lucent SA (NYSE: ALU) relating to the Finnish company buying the French network equipment maker. But the head of NSN has said that he plans no “silly acquisitions” nor even any large transformative transaction. No formal talks about a merger were ever reported.

The chatter about a tie-up between Alcatel-Lucent and Nokia followed the awarding to each company of a 10% share of the total $3.2 billion contracts awarded by China Mobile Ltd. (NYSE: CHL) for the build-out of China’s first 4G network. Nokia’s Scandinavian rival Ericsson (NASDAQ: ERIC) also won 10% of the China Mobile contracts and Chinese networking firms Huawei Technologies and ZTE Corp. took 25% each.

A combined Alcatel-Lucent/Nokia would probably be in a much stronger competitive position because it would be more nearly equal in size to Ericsson and other big players in the network equipment sector. Alcatel-Lucent announced last month that it was cutting 10,000 employees in an effort to reduce expenses by 1 billion euros annually beginning in 2015. Once that plan is complete, a deal with Nokia may move back onto the table.

Alcatel-Lucent shares are down about 3.5% at $3.89 in mid-afternoon trading on Tuesday, in a 52-week range of $0.97 to $4.26.

Nokia’s shares are down the same amount at $7.78 in a 52-week range of $2.92 to $8.13.