Nokia (NSN) and Alcatel-Lucent Merger

Fukuyama

Hey guys,

I don't trade but would like to in the future. I'm always keeping an eye on a few industries.

Telecommunications is a big one for me - I have a personal interest in it (geek) so it makes reading articles/reports a little easier.

Nokia stocks have more than doubled from $3.50 to over $8 since they announced the sales of their handset division to Microsoft at the start of September.

At the start of October, there were rumors that they were considering a merger between NSN (Nokia Systems Networks - which accounts for more than 90% of Nokia's revenue now that their handset business is gone) and Alcatel-Lucent.

Reports seem to suggest that Nokia only want to tie up with Alcatel-Lucent's telecommunications division (mobile networks, customer management services) and not their handset division.

Alcatel-Lucent, when merged a good few years ago, was a mis-managed affair leading to a big dip in their share price. I don't know much else about that deal other than that it took a good while for management to get a hold of the merger.

So, it stands to reason that Nokia's / A.L. shares would dip if they merged.

However, they'd form a great team against the dominant Ericsson and the likes of Huawei from China who are making big inroads into emerging markets like Africa and Asia. Huawei regularly out-price NSN by 15% in Africa.

Any thoughts on whether this might be good for a short if a Merger looks likely, and then buy when the stocks drop?

Cheers,
Dean

Ps. Wouldn't actually be buying myself - I've barely a tenner in my bank account.

simongurnick

Dean0088 wrote: »

Hey guys,

I don't trade but would like to in the future. I'm always keeping an eye on a few industries.

Telecommunications is a big one for me - I have a personal interest in it (geek) so it makes reading articles/reports a little easier.

Nokia stocks have more than doubled from $3.50 to over $8 since they announced the sales of their handset division to Microsoft at the start of September.

At the start of October, there were rumors that they were considering a merger between NSN (Nokia Systems Networks - which accounts for more than 90% of Nokia's revenue now that their handset business is gone) and Alcatel-Lucent.

Reports seem to suggest that Nokia only want to tie up with Alcatel-Lucent's telecommunications division (mobile networks, customer management services) and not their handset division.

Alcatel-Lucent, when merged a good few years ago, was a mis-managed affair leading to a big dip in their share price. I don't know much else about that deal other than that it took a good while for management to get a hold of the merger.

So, it stands to reason that Nokia's / A.L. shares would dip if they merged.

However, they'd form a great team against the dominant Ericsson and the likes of Huawei from China who are making big inroads into emerging markets like Africa and Asia. Huawei regularly out-price NSN by 15% in Africa.

Any thoughts on whether this might be good for a short if a Merger looks likely, and then buy when the stocks drop?

Cheers,
Dean

Ps. Wouldn't actually be buying myself - I've barely a tenner in my bank account.

Might be better to sell a put at a low strike price. If the stock goes up, then you keep some premium, as opposed to being short where you'd lose your ringpiece. If the stock goes down,then you will be assigned and buy the shares at a low price.

Cute Hoor

Took a while but it looks like the deal is now on