Alcatel-Lucent Gains over 8% on Possible Merger with Nokia - Analyst Blog

Alcatel-Lucent(ALU) gained over 8% in yesterday's trading session following the news of a probable merger with the Finland-based communications and information technology company, Nokia Corporation (NOK). The news was stated by the Manager Magazin of Germany.

Previously in 2013, the two companies had assessed the possibilities of a merger but the talks did not materialize into anything concrete.  Manager Magazin cites that per the company insiders, Nokia and Alcatel-Lucent have recently been considering the scope of merger/ cooperation between the two entities again. This probably comes as part of gearing up for the increasing competition in the network equipment industry.

This merger, if it culminates, can prove to be a win-win strategy for both the companies. Synergies from the integration will not only place them better in the telecommunications industry but will also allow the combined entity to face an increasing competition from the lower-priced Chinese equipments on one hand and decreasing call and data charges on the other.

Alcatel-Lucent had been looking for ways to turn around after facing severe losses in the business. The company had initiated its ‘The Shift Plan' strategy in 2013, which finally allowed it to achieve a break-even in the last reported quarter.

On the other hand, Nokia had also been undertaking strategic initiatives to focus more on its core business while cutting down on its losses. Recently, Nokia had divested its handset business to Microsoft Corp. (MSFT) for about for $7.2 billion, in order to concentrate better on the network infrastructure segment for future growth. This merger can provide a new life to both the companies.

However, as of now, no official confirmation has been given out by either of the two companies. All we can do is to wait and watch how things turn out.

Alcatel-Lucent currently carries a Zacks Rank #3 (Hold) . A better-ranked stock that can be considered is ClearOne, Inc. (CLRO), sporting a Zacks Rank #1 (Strong Buy).