Ericsson, Juniper are Next as Nokia Wakes Up Industry: Real M&A
2015-04-14 17:40:59.775 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Deal watchers should turn their attention to
the communications-equipment industry because Nokia Oyj is about
to set off a whole new round of mergers.
The Finnish company confirmed Tuesday that it’s in talks to
buy France’s Alcatel-Lucent SA. Not only would the purchase give
Nokia the lead in selling wireless equipment to customers such
as AT&T Inc. and Verizon Communications Inc., it would also help
Nokia expand into wireline assets such as routers.
The deal -- which would top $13 billion -- could herald a
new era in the industry in which competitors such as Sweden’s
Ericsson AB and Juniper Networks Inc. will need to broaden their
swath of products via acquisitions so that they can provide all
of the equipment that telecommunications companies need. It
would mark a switch in an industry that’s been dormant on the
deal front in recent years.
“We’re entering a period in the industry where a lot of
deals could happen,” Mike Genovese, an analyst at MKM Partners
in Stamford, Connecticut, said in a phone interview. “Nokia and
Alcatel getting together will put pressure on Ericsson to get
into wireline and optical, too. It tends to be a copycat
industry.”
Deal Partners
Genovese identified some potential buyers and targets.
Juniper, with a market value of $9.7 billion, could be either.
Ericsson, which will lose its lead in wireless equipment to a
combined Nokia and Alcatel-Lucent, could respond by buying
Juniper to add IP routers. Or Ericsson could opt for Ciena
Corp., the $2.3 billion maker of optical-transport systems with
which it already has a partnership. Infinera Corp., another
optical-equipment maker valued at $2.65 billion, could draw the
interest of Cisco Systems Inc. or Juniper, he said.
Carriers such as AT&T and Verizon tend to stagger their
capital expenditures on wireless and wireline networks, devoting
six months to one before turning to the other.
“It’s lumpy,” Genovese said. “If you’re only on the
wireless side or the wireline side, your business goes away for
two quarters. So it makes sense to be end-to-end to be able to
offset that and address the entire capex budget of the
carriers.”
Representatives for Ericsson, Cisco and Infinera declined
to comment. Representatives for Juniper and Ciena didn’t
immediately respond to phone calls or e-mails seeking comment.
Shares of Ericsson were unchanged on Tuesday at 114.30
kronor in Stockholm. Juniper surged 1.5 percent to $23.95 at
1:06 p.m. in New York, while Ciena jumped 7.7 percent and
Infinera climbed 3.1 percent.
More Products
A takeover of Juniper, Ciena or Infinera would give
Ericsson a chance to sell more products to some of its current
customers, such as AT&T, Verizon, Deutsche Telekom AG, Vodafone
Group Plc and Orange SA, according to supply-chain data compiled
by Bloomberg.
All-cash deals for Juniper or Ciena at a hypothetical 30
percent takeover premium would immediately boost Ericsson’s
earnings, data compiled by Bloomberg show. Infinera may slightly
dilute earnings this year and next. That’s before accounting for
any overlapping costs that Ericsson could cut. The company had
about 75 billion kronor ($8.6 billion) in cash and cash
equivalents as of December, the data show.
For Related News and Information:
Nokia in Talks to Acquire Network-Equipment Rival Alcatel
New Nokia Equipped to Make a Deal With Alcatel-Lucent: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger calculator: MRGC <GO>
Supply-chain analysis: SPLC <GO>
--With assistance from Adam Ewing in Stockholm.
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman
2015-04-14 17:40:59.775 GMT
(For a Real M&A column news alert: {SALT REALMNA <GO>}.)
By Tara Lachapelle
(Bloomberg) -- Deal watchers should turn their attention to
the communications-equipment industry because Nokia Oyj is about
to set off a whole new round of mergers.
The Finnish company confirmed Tuesday that it’s in talks to
buy France’s Alcatel-Lucent SA. Not only would the purchase give
Nokia the lead in selling wireless equipment to customers such
as AT&T Inc. and Verizon Communications Inc., it would also help
Nokia expand into wireline assets such as routers.
The deal -- which would top $13 billion -- could herald a
new era in the industry in which competitors such as Sweden’s
Ericsson AB and Juniper Networks Inc. will need to broaden their
swath of products via acquisitions so that they can provide all
of the equipment that telecommunications companies need. It
would mark a switch in an industry that’s been dormant on the
deal front in recent years.
“We’re entering a period in the industry where a lot of
deals could happen,” Mike Genovese, an analyst at MKM Partners
in Stamford, Connecticut, said in a phone interview. “Nokia and
Alcatel getting together will put pressure on Ericsson to get
into wireline and optical, too. It tends to be a copycat
industry.”
Deal Partners
Genovese identified some potential buyers and targets.
Juniper, with a market value of $9.7 billion, could be either.
Ericsson, which will lose its lead in wireless equipment to a
combined Nokia and Alcatel-Lucent, could respond by buying
Juniper to add IP routers. Or Ericsson could opt for Ciena
Corp., the $2.3 billion maker of optical-transport systems with
which it already has a partnership. Infinera Corp., another
optical-equipment maker valued at $2.65 billion, could draw the
interest of Cisco Systems Inc. or Juniper, he said.
Carriers such as AT&T and Verizon tend to stagger their
capital expenditures on wireless and wireline networks, devoting
six months to one before turning to the other.
“It’s lumpy,” Genovese said. “If you’re only on the
wireless side or the wireline side, your business goes away for
two quarters. So it makes sense to be end-to-end to be able to
offset that and address the entire capex budget of the
carriers.”
Representatives for Ericsson, Cisco and Infinera declined
to comment. Representatives for Juniper and Ciena didn’t
immediately respond to phone calls or e-mails seeking comment.
Shares of Ericsson were unchanged on Tuesday at 114.30
kronor in Stockholm. Juniper surged 1.5 percent to $23.95 at
1:06 p.m. in New York, while Ciena jumped 7.7 percent and
Infinera climbed 3.1 percent.
More Products
A takeover of Juniper, Ciena or Infinera would give
Ericsson a chance to sell more products to some of its current
customers, such as AT&T, Verizon, Deutsche Telekom AG, Vodafone
Group Plc and Orange SA, according to supply-chain data compiled
by Bloomberg.
All-cash deals for Juniper or Ciena at a hypothetical 30
percent takeover premium would immediately boost Ericsson’s
earnings, data compiled by Bloomberg show. Infinera may slightly
dilute earnings this year and next. That’s before accounting for
any overlapping costs that Ericsson could cut. The company had
about 75 billion kronor ($8.6 billion) in cash and cash
equivalents as of December, the data show.
For Related News and Information:
Nokia in Talks to Acquire Network-Equipment Rival Alcatel
New Nokia Equipped to Make a Deal With Alcatel-Lucent: Real M&A
Real M&A columns: NI REALMNA <GO>
Top deal stories: DTOP <GO>
Merger calculator: MRGC <GO>
Supply-chain analysis: SPLC <GO>
--With assistance from Adam Ewing in Stockholm.
To contact the reporter on this story:
Tara Lachapelle in New York at +1-212-617-8911 or
tlachapelle@bloomberg.net
To contact the editors responsible for this story:
Beth Williams at +1-212-617-2307 or
bewilliams@bloomberg.net
Elizabeth Wollman