Fierce competition has put enormous pressure ON Finnish network equipment maker Nokia to make profits, prompting the company to explore various strategic options, according to foreign media reports.
Nokia is discussing with advisers various alternatives including potential asset sales, merging businesses, diverting investments and adjusting its balance sheet, people familiar with the matter said. However, these discussions are still ongoing, and it is uncertain whether they will prompt any deals. A Nokia representative declined to comment.
News of Nokia’s discussions on these strategies came after the company’s shares had lost about a third of their value in the past year. Nokia cut its earnings forecast in October and suspended its dividend, not expecting a sharp recovery in profits until 2021. That has increased pressure on Chief Executive Rajeev Suri to act.
Another possibility Nokia could consider is merging with rivals such as Ericsson, or collaborating in certain areas. Still, such a move would face significant hurdles, including political pressure to preserve jobs and antitrust scrutiny. A representative for Ericsson declined to comment.
Nokia’s limited number of direct competitors also requires the company to consider interest from other sectors, such as tech companies or wireless carriers, if it seeks a full sale.
In December, Nokia announced that Chairman Risto Siilasmaa would step down, sparking speculation of deeper changes at the company. The company is in fierce competition with Ericsson and Huawei for 5G market share.
“In our view, Nokia’s efforts to transition to cost-competitive 5G hardware designs have delayed its return to sustained growth and profitability,” said Bloomberg Intelligence telecom analysts John Butler and BoYoung Kim. As the 5G spending cycle is accelerating, this puts Nokia at risk of losing early incentives.”
However, U.S. Attorney General William Barr said this month that the U.S. should “actively consider” investing in Nokia or Ericsson to counter threats to the emerging 5G sector.
While catching up with rivals, Nokia’s 2016 acquisition of French rival Alcatel-Lucent helped it expand its product offerings, but this may have slowed down the development of new products as it continues to complex integration.