June 19th, 2006 Leslie D'Monte
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The Siemens-Nokia pact is likely to spark a new global wave of consolidation and a round of price wars. The deal will create the world’s third-largest network equipment concern behind Ericsson and a combined Lucent and Alcatel. The transaction is also likely to put considerable pressure on Motorola which will be reduced to the No. 4 position as network
equipment maker in the world just as its business is turning around as a result of its hot-selling Razr cell phones.
New low-cost competitors entered the market, particularly from Asia. Huawei, for instance, has been able to win contracts in Asia in places where Lucent and others had previously been successful. Siemens had sold its cellphone handset division to BenQ of Taiwan last summer. BenQ still uses the Siemens brand name and Siemens factories in Germany, but the Taiwanese company ultimately hopes to build a brand of its own.
And Nokia has been looking to strengthen its network business to compete better with Motorola. Of course, what happens to Nortel Networks — The Canadian network equipment maker — is a big question.
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(2 votes, average: 4.5 out of 5)
June 19th, 2006 at 10:52 pm
Cartelisation! Can you smell it? Small fish gets together to challange the big one. Ultimately, they’d make the entry barriers high enough to make it difficult for the new incumbent. They’d also move in their own standards and charge a hefty fee for the patent royalties.
As for Huawei, its been majorly financed by the Chinese Government, a charge that Huawei obviously denies.
June 20th, 2006 at 2:38 pm
These majors have been forced to consolidate because of increasing competition and lower margins. This way they will be better placed to compete with Huawei and other chinese companies ( these are financed by the state at very low interest rates). I hope this merger will be synergic and they will continue to innovate and produce world class technolgies and products as before.