Nokia buys Alcatel-Lucent for $16.6B; may spin off Here map service

Finland’s Nokia has agreed to buy France’s Alcatel-Lucent for $16.6 billion in stock, one of the largest telecom deals in recent years and one that will create a new tech giant on the European landscape.

Nokia announced the deal today, and also said it had “initiated a review of strategic options, including a potential divestment, for its Here business.” The mapping service has been growing nicely, but it is clearly an odd fit for a company that has increased its focus on selling networking and telecommunications gear.

The moves are part of a radical transformation of one of Europe’s most storied tech companies that began last year when Nokia sold its mobile handset business to Microsoft. Once a global powerhouse, Nokia has stumbled in recent years as its mobile phone business was decimated, and the company has been scrambling to refocus its business.

“Together, Alcatel-Lucent and Nokia intend to lead in next-generation network technology and services, with the scope to create seamless connectivity for people and things wherever they are,” said Rajeev Suri, president and chief executive of Nokia, in the acquisition statement. Suri will remain CEO after the merger.

The company hopes its new size will put it in a better position to compete with networking goliath Cisco Systems. The combined Nokia-Alcatel-Lucent (which will just be called Nokia and be based in Finland) will have more than 110,000 employees, including 40,000 working in R&D. Those numbers will likely be cut, however, as the companies combine.

Crucially, the deal also has the blessing of the French government, which in the past has moved to block acquisitions of home-grown tech companies such as Dailymotion.

Nokia did not give a firm timetable for making a decision about the future of Here. “The strategic review of Here is on-going and it may or may not result in any transaction,” the company said in a statement. “Any further announcements about Here will be made as appropriate.”