After granting a ten-year exclusive brand licensing rights to HMD Global to make and market its android phones, Nokia is now looking towards greener pastures of the ever-expanding telecom software industry.
Nokia’s February 2 announcement of an intended buyout of Comptel, a Finnish company like itself, for a whopping $370 million bears testimony to Nokia’s efforts to shore up its software and networking portfolio and its dwindling sales in its networks business.
In its earnings report for the fiscal Quarter ending Dec 2016, made public on February 2, 2017, Nokia showed a 14 percent decline year-over-year in its networking sales. Rajeev Suri, president, and CEO of Nokia, while accepting the slowdown showed positivity toward better results this year in his statement on the financial performance of the company.
Here’s an extract from the CEO’s statement:
“Our ongoing intense focus on execution, cost management, and pricing discipline was critical to offset the impact of challenging market conditions over the course of the year. While I remain disappointed with our top line development in 2016, we continue to expect our performance to improve in 2017 and see the potential for margin expansion in 2017 and beyond, as market conditions improve and our sales transformation programs gain further traction.”
Nokia’s area of expertise has been on the hardware and equipment side but it is looking to change all that now by focussing on capturing a chunk of the telecom software business. Buying out Comptel – a company that specializes in providing telecommunications software and networking solutions to mobile network carriers with a customer base of over three hundred operators in various countries – is a move towards achieving that end.
The Comptel buyout is expected to further consolidate Nokia’s own carrier solutions business. Comptel’s expertise merging with its own will provide a solid platform to launch an aggressive marketing strategy to get the attention of wireless carriers that are looking to optimize their network and business operations and other business capabilities.
“Nokia is committed to building its software business and is backing its commitment with strategic investments. The timing of the Comptel purchase is important as our customers are changing the way they build and operate their networks. They are turning to software to provide more intelligence, automate more of their operations, and realize the efficiency gains that virtualization promises,” said Nokia’s Applications & Analytics business group president, Bhaskar Gorti speaking on the proposed acquisition. “We want to help them by offering one of the industry’s broadest and most advanced portfolios. Comptel helps us do that,” he added.
Independently, both Nokia and Comptel would have had difficulties to continue competing with giants like Ericsson, Cisco, and Amdocs but together they stand a better chance of giving competitors a run for their money. Nokia and Comptel are anticipating the Comptel buyout will level the playing field considerably.
“Together with Nokia we would create an agile and innovative player which can challenge current market leaders head-to-head,” is what Juhani Hintikka, President, and CEO of Comptel, said in a statement in this regard.
In addition to its software technology, Comptel would also be giving Nokia a network of marketing workforce and an existing carrier base for upselling other products and services. “Comptel would bolster Nokia’s software portfolio by adding critical solutions for catalogue-driven service orchestration and fulfillment, intelligent data processing, customer engagement, and agile service monetization,” Nokia observed.
The proposed buyout deal has not been closed yet but Nokia has estimated that shareholders with 48.3 percent of Comptel shares have agreed to sell. The shareholders who are willing to part with their shares at the offered price of £3.04 per share in cash include the Comptel President and CEO and the Board of Directors, Mutual Insurance Company, Kaleva Varma Mutual Pension Insurance Company, Mandatum Life Insurance Company Limited, Ilmarinen Mutual Pension Insurance Company, and Elisa Corporation.
Nokia is expected to provide an update in regards to the buyout proposal on February 24.