Nortel Networks Ltd. may not be talking about the rumour suggesting its wireless division might merge with that of Motorola Inc., but the rest of the industry certainly is. Analysts say this is good news, if the gossip proves true.
Late last month the rumour mill got churning. Word was, Nortel and Motorola were discussing linking wireless infrastructure arms, presumably to better compete in the “Third-Generation”, or “3G”, world of global system for mobile communication (GSM) and advanced code division multiple access (CDMA) networks.
Nortel offered no comment and tried to quell incoming queries from curious journalists.
“To spare you making any more phone calls…and jamming my phone line-voice mail, ‘We don’t comment on rumour and speculation,'” said David Chamberlain, the company’s director of communication, in a pre-emptive e-mail on March 22.
Brownlee Thomas, Montreal-based research director of telecom services with Giga Information Group Inc., said the rumour, if true, bodes well for both firms, with a caveat.
“It depends on how they do it,” she said, noting that while Motorola and Nortel likely would enjoy a complementary relationship to a point, neither firm wants to be mired in the other’s trouble. Nortel has seen its stock price sink over the past year as telcos and other customers closed their wallets.
Motorola, meanwhile, has lost market share – and customer confidence – to a bevy of competitors, including Ericsson, Nokia, LG and Samsung, said Kevin Lo, a technology analyst with Lightyear Capital Inc. in Calgary.
A combined wireless force could be the answer to the companies’ prayers. For Nortel, it spells “a way to drive revenue,” Thomas said. “This is one way to do it without spending a bundle of money.” With Motorola’s radio technology know-how, Nortel’s research and development costs stay low.