Merger mania in the telecom networking industry has

Nortel

(NT)

feeling left out.

Nokia

(NOK) - Get Report

and

Siemens

(SI) - Get Report

became the latest gearmakers Monday to join the merger wave. They set out a

big plan to combine their network gearmaking businesses, putting Nortel in a tight spot.

The networking merger race is now in its late stages. By now, Nokia has found a partner in Siemens, and

Ericsson

(ERICY)

has acquired

Marconi's

equipment business. Even humble

Lucent

(LU)

has a buyout in hand from

Alcatel

(ALA)

.

The shakeout leaves networking specialist Nortel, as well as tech titan

Motorola

(MOT)

, scrambling for potential partnerships of their own. But Wall Street is far more concerned about Nortel, and that is why its shares were down 10% at midday Monday.

The pressure to merge or abandon the market stems from the recent wave of consolidation among phone companies. The shrunken field of customers is now ordering less equipment than they would have separately. That has undercut supplier revenue, forcing vendors to slash costs and broaden product offerings through mergers.

"Given Motorola and Nortel now appear to lack telecom infrastructure scale vs. key competitors, we expect both vendors to look at strategic alternatives for these businesses," UBS analyst Nikos Theodosopolous wrote in a research note Monday.

And from the phone-company standpoint, there is a growing need for new gear that merges conventional phone systems with the Internet and wireless traffic on one network. These large-scale upgrades require a broad array of equipment and technical knowledge that's probably best handled by one team, says Yankee Group analyst Mark Bieberich.

"Service providers want fewer vendors to manage bigger projects," says Bieberich.

Over the next few years, Bieberich predicts that the field of 10 to 15 equipment suppliers will shrink by half through mergers.

Nortel, despite its third round of accounting errors and bookkeeping cleanup efforts, has vowed to push ahead alone with its hybrid phone and Internet protocol gear and strong wireless infrastructure products. Hard-charger CEO Mike Zafirovski is retooling the telecom giant so it fits better in a more Internet-driven, increasingly wireless world.

Motorola isn't as well-positioned in the wireless infrastructure market, though its strong cell-phone business makes the networking shakeout less of an immediate concern. The Schaumburg, Ill., tech shop didn't make Dell'Oro Group's top-eight list of wideband code division multiple access, or WCDMA, suppliers last year. Motorola's absence is no small deal, since these so-called 3G networks are the biggest growth area going in wireless gear sales.

And in areas such as CDMA, where Motorola has a solid business, the company is the No. 3 player, with 19% of the market share. That compares with 48% at leader Lucent, according to a fourth-quarter Dell'Oro tally.

Probably even more threatening for Motorola is that once Nokia unloads its networking business, the world's largest mobile-phone maker will then be free to focus entirely on cell phones.

Motorola's successful Razr phone design has helped the No. 2 handset player gain on a distracted and unfashionably late Nokia in the handset race. Now, with mobile phones set to get all of Nokia's attention, critics may soon start pointing to a list of businesses that may be distracting Motorola.

Motorola shares rose a penny to $20.09, and Nortel fell 21 cents to $2.09 in midday trading Monday.