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Nokia-Siemens deal gives enterprises better upgrade path: experts

By joining forces, Nokia and Siemens plan to become one of the largest fixed-mobile convergence vendors. The merger could help network operators using their equipment to upgrade for bigger and better things

Nokia and Siemens joined forces this week, merging their communications service provider businesses into one fixed-mobile convergence powerhouse.

According to experts, enterprises using gear from the newly formed Nokia Siemens Networks could soon reap benefits by taking advantage of newer technologies from a convergence heavyweight.

"At the end of the day, it makes a lot of sense," said Jack Gold, principal and founder of J. Gold Associates, a Northborough, Mass.-based research and advisory firm.

Over the past few years, Siemens had ditched its handset business to focus more on infrastructure, while Nokia had a decent infrastructure business and booming handset sales.

Combining the assets of both companies will keep the two former competitors going strong, according to Gold.

A statement released by both companies said the merger will be a 50-50 joint venture between Nokia's Networks Business Group and Siemens' carrier-related operations for fixed and mobile networks. Nokia and Siemens predict the pairing will make them the market leader in fixed-mobile convergence.

And for companies with infrastructure from either Nokia or Siemens, experts said, the merger could have benefits in the longer term, despite having no immediate impact.

Gold said that it should be "business as usual" for Nokia or Siemens users, and the merger could provide companies a better upgrade path with more options and newer technologies.

"It provides them with stability and capabilities they didn't have before," he said. "If I were a carrier or user infrastructure person, I'd say, 'Ah, good!' "

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 Jeff Heynen, directing analyst with Infonetics Research, agreed with Gold that enterprises may be relieved by Nokia and Siemens' shaking hands, which could open a new door to convergence.

"As network operators converge their wireline and wireless networks to more efficiently deliver voice, data and video services, manufacturers have to join forces to create the scale and expertise necessary to provide end-to-end support," Heynen said. "What this joint venture brings is experience and success in both wired and wireless networks. More importantly, for the world's largest operators, it gives them one throat to choke when the inevitable problem arises."

The companies' merger statement indicates that the combined company portfolio will include Next Generation Network convergence products such as IMS, 2G GSM/EDGE access, 3G WCDMA/HSDPA access, extensive mobile core, fixed broadband, transport, IPTV, LTE, WiMAX and low-cost mobile voice products.

Infonetics Research directing analyst Richard Webb said that the deal will not really affect enterprises today but will eventually help push quadruple play and fixed-mobile convergence into more organizations.

"The focus of the Siemens-Nokia deal is on quadruple play broadband and fixed-mobile convergence, both of which have shown up on our recent studies as being very much at the forefront of carriers' strategic thinking," Webb said. "A Siemens-Nokia partnership looks to be a genuine symbiosis, without too much overlap. In our tracking of the radio access network equipment market, Nokia is definitely A-list, especially in the 3G segment, and combining this with the strength of Siemens in the long haul and core and edge fixed networks will create a carrier network heavyweight that could be more than the sum of its parts, a case of 2 + 2 = 5."

Craig Mathias, principal with Ashland, Mass.-based Farpoint Group, said the merger was a reaction to the recent Alcatel-Lucent deal and is likely to be one of many joint ventures going forward.

"The name of the game in a relatively mature business environment -- with a corresponding low innovation rate -- is bulk and lower costs, and that's what's happening here," Mathias said.

Avi Greengart, principal analyst with Current Analysis, agreed that the long-predicted coupling "just makes sense."

"Nokia gets the vast majority of its revenue from handsets," Greengart said, "so spinning out infrastructure should give its core handset business more management attention. However, neither company wanted to simply sell off their infrastructure units outright because there are synergies that can be attained with their existing line of business."

Daniel Taylor, managing director of the Mobile Enterprise Alliance, said the merger shouldn't mean much to enterprise users just now, and it will be carriers that take notice first.

"This is about networking hardware and software sold to the carriers," Taylor said. "Let's keep in mind that Nokia's strength has been in the handset, not in the back-end telco equipment. The merger of Alcatel and Lucent puts pressure on the smaller players, and two of them have combined in a joint venture."

Taylor added that Siemens has been looking for a new direction with its business unit after selling off its handset business last year. On the IT side, Siemens already works in a joint venture with Fujitsu.

The merger should not affect the enterprise, according to Taylor, because Nokia will still control its dominant handset unit; Nokia still has an enterprise business unit, and Siemens is keeping its own business unit that sells PBXs and networking equipment; and Nokia and Siemens will remain separate companies with distinct enterprise offers and channels for other divisions.

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