Report that Huawei is considering the acquisition of the struggling handset maker appears to be a case of an exec talking out of school.
Nokia's stock surged after reports speculating that the struggling Finnish handset maker would be an acquisition target of Chinese telecommunications giant Huawei. Huawei has since refuted the reports.
The Financial Times reported earlier this week that Richard Yu, chairman of Huawei’s consumer business group, said his firm could be interested in acquiring Nokia. The FT reported that Yu said Huawei is "considering these sorts of acquisitions" but that it "depends on the willingness of Nokia."
The Bloomberg news service reported on Thursday (June 20) that a spokesman for Huawei said in an emailed statement that the company has no plans to acquire Nokia. The spokesman went on to tell Bloomberg that Huawei has in its history only made a few small acquisitions, nothing along the lines of a company the size of Nokia.
And just to make it even more interesting, the Wall Street Journal reported Wednesday that Microsoft also was in talks with Nokia to acquire parts of the company, but that those talks fell apart.
In a blog on the subject posted Wednesday, Nick Spencer, a senior practice director at ABI Research, also threw cold water on the idea that Huawei would acquire Nokia. Among other things, Spencer declared that "Nokia's brand is yesterday's brand."
Spencer went on: "Nokia’s IP portfolio is valuable and would have an impact on Huawei’s cost to build, but I am unconvinced. Huawei’s lack of past acquisitions is further evidence to suggest this is an unlikely scenario."
Spencer believes that the comment by Yu was simply Yu's way of trying to drum up some PR for the launch of Huawei's Ascend 6 smartphone, or Yu simply talking out of school and creating headaches for his PR team.
I would tend to agree. It seems unlikely that Huawei would have any interest in acquiring Nokia. It seems to me a case where an executive may have gotten a little too cozy with a journalist and exaggerated, if nothing else. Or maybe Yu just wanted to make the point that Huawei was willing to consider anything in its quest to grab a bigger slice of the global handset market.
At any rate, I don't expect this will have a long term impact on Nokia's sagging fortunes. But it did give Nokia's stock a nice bump, at least for a day.
There is a life of a brand. Brand from yesterday becomes "My Dad used that". The challenge to all brands is how they can "innovate" themselves to become brand of today or, even better, of the future.
Nokia has a long history to innovate itself. They didn't start off from mobile phone makers and telecommunication. They have become one of the successful ones. They are struggling today. Would Nokia's management be able to reverse the current downward trend? I haven't seen light. Maybe, a drastic change, an acquisition, would help.
Huawei is a much younger company. Their success in the telecommunication market has given a solid proof of their management. Huawei is a known brand to most telecommunication professionals. It may not be so known in the general public. Acquiring Nokia, Huawei might save the day of building its own brand in the mobile phone market. Yet, it will as well inherit the "old brand" image. Will Huawei actually benefit from the deal?
On the other hands, Nokia investors might very much welcome the acquisition. Mobile phone market has changed so much. People are, in general, not attracted by the industrial design and the cost of the device. They are attracted by variety of apps and the availability of the apps that they are currently using. In addition, processing power of the device, size of the screen and OS are as important. Partnership with MS doesn't seem to do enough good to Nokia. Investors might just sell it if the price is right.
I can see reasons why Huawei might be interested in Nokia, but I doubt it would be a good fit.
Hauwei is a B2B outfit. Nokia makes consumer products. Hauwei's challenge in their new smartphone will be learning to sell to the consumer through retail channels.
Nokia might help there, but branding is critical. It's probably better to think of phones as fashion accessories than as consumer electronics. A phone isn't just a phone. It's a status marker. For many (perhaps most) phone buyers, a key part of the purchase decision is keeping up with their peer group, and being able to say "My phone is cooler than yours!"
Nokia is in trouble precisely because their phones *aren't* cool. In the cell phone business, you're as good as your last smash hit phone, and Nokia hasn't had one for a long time. That made Nokia's decision to use Windows Phone as their base OS doing forward questionable.iOS is cool. Android is cool. Windows *isn't* cool, and Nokia and Microsoft's challenge is making it cool.
Hauwei is looking at the burgeoning Chinese market, and assuming that as a Chinese manufacturer, they'll have a leg up in selling into it. The question is whether Nokia will help there. The anwer will likely depend on what sort of penetration in China Nokia already has, and the Chinese market's perception of the brand. (I have no idea, but my impression is "Designed and built in China by Chinese" is an important part of their purchase decision.)
Would Huawei announce this in an interview and increase the price for Nokia? Perhaps anybody else has an eye on Nokia and Huawei wants make an acquisition more or too expensive for them with such rumours.
Olaf is totally right. If Huawei want to acquire Nokia, they will want to do without these kind of press releases.
I doubt whether Europe will ever sell Nokia as they want to retain a hand in the future of tech. Only recently Europe gave 12B$ freebies for all the European semi companies.
IMO, this is just an attention seeking press release from Huawei. At best, to put investor pressure on Nokia.
"I doubt whether Europe will ever sell Nokia as they want to retain a hand in the future of tech."
Europe is not a monolithic entity. The EU brought greater integration, but not that sort of control. Nokia is a Finnish company. The government of Finland may have something to say about a sale of Nokia to a foreign buyer. Europe as a whole does not.
For one, Huawei would get some world-class engineers from Nokia's R&D team. But can Huawei do a better job of leveraging that talent than Nokia's management has done lately? That is one of the questions that needs to be answered...