More thoughts on the Bank Of America's research note on the Nokia-Alcatel deal, I believe the research team has done extensive work on where the cost reduction synergies lie, the note is very comprehensive and carries a good deal of credibility.

I believe their estimate is fairly accurate, they make a good case of why just in Wireless alone there could be about $900M of cost reductions.  Additionally they touch on cost savings on 35 R&D (24 are ALU's and 11 are Nokia) sites spread around the globe, clearly Rajeev Suri, Nokia's CEO is exerting stricter cost controls than ALU had in the past.  R&D sites are especially expensive, given that compensation (salaries, benefits and pensions where applicable) for engineers and managers in this field are particularly high.  I agree that in R&D alone there could be a huge area for cost controls.

 

They also touch on consolidating manufacturing sites, especially in China, where both NOK and ALU have a total of 5 sites, and an additional 6 around the globe.  They too mention that Sales force in Wireless is also another area where lots of cost controls can be had, then there is the personnel involved in Switches and Routers (from Juniper) and backhaul (Dragonware), which won't be needed because ALU brings that with the deal.

 

They too touch on refinancing debt at the much more palatable interest rate.

 

There is plenty of cost savings opportunity for the combined entity.  It will take several years to achieve all the cost reductions, specially the R&D site consolidation, hence my 3 to 4 year horizon.

 

I find it extremely hard to think this is not a golden investment opportunity, I trust that Rajeev Suri possesses the right skill set to deliver on these promises.  He got high praise for his handling of the Motorola and Nokia-Siemens integration into Nokia from a lot of the Telecom Equipment sector analysts.