Nokia Corporation (ADR)(NYSE:NOK) CEO Rajeev Suri confirmed that the “weak” earnings in the first quarter doesn’t pose any threat to planned acquisition of Alcatel-Lucent SA, a deal valued at $17.5 billion. The shares of Nokia which are supposed to be used as a currency to pay for Alcatel have declined 14% in Helsinki trading since Nokia announced a profit margin lower than analysts’ estimates.
The details
Suri further added that some people have said that the weaker performance of Nokia Networks in 1Q puts the acquisition deal at risk. However, it is not the case as the acquisitions like this are not dependent on just one quarter. The deals are made as per the contribution they can make in long-term. Nokia approved to acquire Alcatel in April to transform itself as the leading manufacturer of equipment that supports wireless networks.
The measures
Nokia has been implementing measures to reduce costs and support R7D measures to become more competitive against Sweden’s Ericsson AB and China’s Huawei. It reported adjusted operating margin of 3.2% at networks unit compared to 9.3% a year earlier. However, the company is confident to achieve full-year objectives.
The view on ‘HERE’
It is even trying to find buyers for its maps business, popularly known as ‘HERE’. It intends to shift its focus on networks and it is the prime reason it is looking to close Alcatel acquisition deal. Suri said that the company is not compelled to sell ‘HERE’, but the platform has been fetching ample interest because of its uniqueness and popularity.
Right time
It has drawn interest from car-part suppliers and automakers. The other interested parties include internet services and online taxi services. It can consider possible divestment after completing an all-share take-over of Alcatel-Lucent. Nokia Chairman Risto Siilasmaa said that it is the right time for consideration, not only because of acquisition deal of Alcatel-Lucent but also due to the momentum recorded in navigation markets.
