Shotgun Weddings in Network Market

It's interesting how clearly the Nokia-Siemens merger is presented as a de facto Nokia takeover.

Sony Ericsson set up shop in London to find the most neutral HQ site outside Zurich. Lucent brought a CEO with a nearly ironclad contract to Paris, another compromise. But the Nokia-Siemens network unit is going to be based in Helsinki with a leader from Nokia. Helsinki has many attractive qualities, but it is not a magnet for multinational headquarters.

The Nokia-Siemens network unit is clearly on its way to being dominated by Nokia's executives. It is a notable concession to Siemens that the profit split is going to be 50/50, because any money made by this company is likely to be dominated by Nokia's W-CDMA products in the longer run.

After two wedding banquets, Motorola and Nortel are now left at the loser's table, nervously eyeing each other while the rest of the crowd dances the Macarena. It's not a happy image.

Nortel is now a code word for accounting trouble, and Motorola's '90s network cash cow -- the iDen technology used by Nextel -- is being phased out after the recent Sprint-Nextel merger. Nortel dropped out of the recent Indian GSM network auction at a very early stage, and neither is well positioned for the upcoming Chinese 3G auctions.

Ericsson is floating up there in the rarified air of a company holding more than 40% market share in the hot new sectors like W-CDMA and value-added network services. It's unlikely to entertain merger notions on the mobile side. Lucent, Alcatel, Nokia and Siemens are going to be busy dealing with their new mergers.

That leaves the infra division of Motorola and Nortel in its entirety either with each other or fodder to the Chinese network raptors emerging from the underbrush. Whatever the companies decide to do, the clock is now ticking. The heft of the new Big Three network vendors is probably going to drive costs -- and contract prices -- down further by end of 2007.

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