Moto, Nortel deal in the works?

Consolidation appears to still be an unavoidable result for many in the world of network infrastructure. Motorola Inc. and Nortel Networks Corp. are reportedly in talks to merge their wireless infrastructure businesses, according to the Wall Street Journal.
Both companies refused to comment.
Lucent Technologies Inc. and Alcatel Corp. merged in 2006 to form Alcatel-Lucent while Nokia Corp. and Siemens AG formed Nokia Siemens Networks as a joint venture that same year.
A combined Motorola and Nortel would have 16% global share of the market with strengths in CDMA at a 60% share and WiMAX at 25%, according to a research note from Oppenheimer and Co. Inc.
The financial firm concluded that a joint venture would be positive for both companies.
Meanwhile, the news comes as Motorola’s CEO announced that the company may seek to create a standalone business for its handset division. So a joint venture on the infrastructure side wouldn’t be particularly far-fetched. Executives and board members appear receptive to multiple spin-off scenarios.
Nortel would, however, come to the table with some heavy baggage. Last March, four former executives were charged with repeatedly engaging in accounting fraud to bridge gaps between the network-equipment maker’s true performance, its internal targets and Wall Street expectations. The financial troubles besetting the company seemed to hit a head the previous month when its CFO left the company after a slew of problems were made public.
The Toronto-based company failed to accurately report financial reports for any year in the current decade, which led to various financial restatements with the Securities and Exchange Commission. But the company appears to finally be making a turnaround, with a nice boost in revenue during the third quarter of 2007, the last period the company has filed for at this point.
Nonetheless, if both companies come together it would behoove them to learn from the lessons of other recent tie-ups in the market.
Alcatel-Lucent has suffered disappointing results since the companies merged. It reported a loss of $3.74 billion during the last quarter, bringing its total loss to $5.1 billion for 2007. The company wrote down $4.3 billion against its 2006 merger between the two companies. Since the companies combined about 14 months ago, the combined entity has lost more than $20 billion in market capitalization.
“This was the largest merger in our industry and it proved to be more difficult than expected,” CEO Patricia Russo said in a news conference last week, according to news reports. “I think the bulk of the things we had to sort out have been sorted out.”
Alcatel-Lucent cut more than 5,000 jobs during 2007 and says about 4,000 more employees will be let go by the end of 2008. And Russo has suffered speculation about her future at the company.