Telecom equipment M&A slows

Entering August, a major telecom equipment vendor merger or acquisition seemed extremely likely. Tellabs reportedly was considering an offer from Nokia Siemens Networks; Nortel Networks admitted keen interest in M&A; Motorola had just moved to buy Leapstone and had demonstrated a past pattern of doing deals in bunches; and Cisco Systems--well, Cisco hadn't bought anyone in a while, so something had to be up.

Alas, while there's been a couple of intriguing deals lately--one example being Pannaway's acquisition of Telstrat--none of the seemingly imminent action by the largest tier of vendors has developed on cue. Not a word from Tellabs and Nokia Siemens; little to no movement by Nortel, though no shortage of candidates; Motorola has perhaps turned its attention to Sprint's WiMAX network; and Cisco--what is Cisco up to anyway?

There could be many reasons more deals haven't developed yet: International vendors, who for so long had inferiority complexes about the U.S. markets, finally may have realized the United States consists of three big telcos with vendor contracts written in stone, and many hundreds of other telcos they know too little about. Or, the stock market roller coaster ride could be making big vendors too sick to stomach more deals. Or, perhaps everyone is just "away"--it is August, after all.

I'd say it could last, but the vendor landscape seems like it's in such an unfinished state right now. Cisco is making a strong assault on the service provider market, but hasn't made a whopper deal in the segment since its Scientific-Atlanta acquisition. Motorola has been aggressively building wireline--and specifically IPTV--assets, but does it have what it needs to make a run at the likes of Alcatel-Lucent and Ericsson? Can Nortel propel itself back into the top tier of worldwide carrier vendors with the right deals? There are also a few mid-sized vendors lingering out there, maybe not big and broad enough to get and keep major ILEC contracts, but also perhaps lacking connections in the market of smaller telcos.

Deals haven't been developing lately, but just you wait. Vendor consolidation isn't over just yet. - Dan