Nokia and Alcatel-Lucent believe that, by joining forces, they will gain a stronger position to compete against European and Chinese rivals. Nokia said that its acquisition of the French-based telecom company will make the merged companies the second-largest telecom equipment maker in the world after Ericsson of Sweden.
Nokia, which sold its division of mobile handsets to Microsoft in 2014 for $7.2 billion, has deviated its focus on patent licensing, mapping and location services and network equipment manufacturing. With the acquisition of Alcatel-Lucent, the company sees a 50 percent increase in their market reach.
"The combined company will be in a position to accelerate development of future technologies including 5G, IP and software-defined networking, cloud, analytics as well as sensors and imaging," said Nokia.
In addition to the acquisition announcement, Nokia added that they may consider selling its own mapping business, HERE Maps, while reviewing other business options that could either finalize or drop their decision to sell. The said division makes up less than five percent of the company's annual sales.
Rajeev Suri, President and CEO of Nokia, sees the acquisition as "the right deal, with the right logic, at the right time."
"We will have a strong presence in every part of the world, including leading positions in the United States and China."
Suri joined Nokia in the mid-1990s. Under his leadership, the company successfully overhauled its telecom unit through cost and job-cutting schemes.
Similarly, Michel Combes, CEO of Alcatel-Lucent, sees the deal as something that could bring in the needed strength and critical scale in order to become a global leader in the continuously evolving world of technology.
"We believe our customers will benefit from our improved innovation capability and incomparable R&D engine under the Bell Labs brand," said Combes. "The global scale and footprint of the new company will reinforce its presence in the United States and China."
The deal, which is valued at $16.6 billion, is expected to be finalized within the first half of 2016. The joint company aims to have a stronger presence in the areas of cloud services, fixed and mobile broadband and the enterprise industry.
Nokia later predicted achieving a 3.5 percent growth rate in sales for 2014 to 2019 due to the acquisition.
