Chinese telecom company Huawei publicly opined Tuesday about the possibility of buying troubled cell phone manufacturer Nokia (NOK). Nokia surged on this news, going up 11 percent midmorning upwards of $4 per share before tapering off. Nokia partner Siemens has openly been shopping the joint venture Nokia Siemens Network, and there’s plenty of interested parties. Huawei chairman Richard Yu openly opined that the smartphone market was moving towards being just “three or four companies,” and a takeover of this magnitude would certainly solidify Huawei as one of them.
Nokia has long fallen behind competitors Apple (AAPL) and Samsung and is quickly running out of options. There have long been whispers of impending bankruptcy for Nokia, but a takeover from Huawei could signal a change in fortune. A merger with Nokia would also solidify Huawei as the world’s largest smartphone maker. Besides their interest in Nokia, Huawei is also set to debut their Ascend P6 phone on Western markets, touted as a cheaper, slimmer alternative to the iPhone and Samsung Galaxy.
This acquisition would immediately make Huawei a major player beyond just in hand-held smartphones. They’re paying keen attention to developments like Google Glass (GOOG) and the (still in earliest stages) Apple watch. And a merger would put Huawei in a class where they’re able to begin not just aping the majors on the Western market, but competing with them as well. Huawei's big disadvantage in the West is lack of name recognition, and Nokia could help assuage that. But Huawei isn’t alone in their interest in Nokia. Private equity firms Blackstone (BX), TPG and KKR (KKR) have also expressed interest in the beleaguered Finnish company’s NSN division.
Other beleaguered smartphone makers responded to the takeover rumors well. While rival Blackberry (BBRY) has fallen on hard times the last few years, the last few months have been a recovery of sorts for them, and on today’s news they’ve posted a 4 percent increase. VeriFone (PAY) likewise is up 52 cents, for an increase of 3.3 percent. Regardless if the Nokia buyout takes place, there remains a good chance the company will not survive three years.
Whether Huawei’s prediction of a world with only three or four smartphone makers holds true remains to be seen. But it increasingly looks like there might at least be one less.
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