A few weeks ago, Nokia (NYSE:NOK) reported a soft quarter that caused its stock to plunge by 11.65%. It also appears that Motorola (NYSE:MOT) is gaining ground on the mobile-phone maker. And Nokia's CEO, Jorma Ollila, said he will leave the company next year (although he will remain as the chairman of the board).
This is stuff that definitely concerns Nokia shareholders. A takeover rumor would probably catch their interest, too. That's what happened yesterday, when a report from U.K.-based newspaper The Business indicated that Cisco (NASDAQ:CSCO) is exploring a bid for Nokia.
But let's face it: With a $73 billion market cap, Nokia won't have many suitors.
True, Cisco is no stranger to buying companies. And during its recent spurt of activity, it appears to be focusing on smaller acquisitions. It recently paid $30 million for NetSift, which develops packet processing solutions for computer networks. There was also the $97 million deal (up to $122 million if certain "product milestones" are met) for Sheer Networks, which develops network service management products.
Basically, Cisco buys companies to enhance its infrastructure services. But in buying Nokia, Cisco would be entering the consumer-handset market for the first time. There are some apparent synergies, though -- such as with Nokia's Networks division. Rumors have floated around over the past few years that Nokia would sell off this division, and it could certainly use some help, especially since its chief competitor, Ericsson, is making inroads. The division would fit nicely within Cisco's wireless-infrastructure focus, and Cisco would benefit by gaining access to Nokia's "intelligent" wireless applications and its base of network operators.
But here's the problem: Both companies' stocks have been treading water for some time. And with Cisco's market cap at $123 billion, an acquisition would be dilutive to its shareholders, even if it kicked in some of its cash hoard.
The rumor did little to ignite Nokia's stock, which gained a mere $0.14 to close at $16.08 Monday. According to the Finnish News Agency STT, Nokia's chief of corporate communications, Arja Suominen, denied the news as unsupported speculation. In any case, the deal would probably fall apart over matters of ego, such as trying to figure out whether to call the new company Noisco or Ciscia.
Fool contributor Tom Taulli does not own shares of companies mentioned in this article.
