Here's why Huawei might be serious about acquiring Nokia

Lenovo's slew of acquisitions has also sparked market talk that it might be interested in IBM Corp's server business, as well as handset makers Research In Motion and Nokia

News | by Sharath Kumar

BANGALORE, INDIA: It's like at least one company being acquired by Chinese behemoths every day in Europe. Is Nokia, once's Europe's most profitable tech company, the next to be acquired by a Chinese OEM?

The hint on interest to acquiring Nokia comes from Huawei's device chairman, Richard Yu, who told an FT interview on Tuesday, "We are considering these sorts of acquisitions; maybe the combination has some synergies, but depends on the willingness of Nokia. We are open-minded".

In June, three prestigious European companies - Bordeaux wine châteaus, Bon Pasteur, Rolland-Mallet and Bertineau St.-Vincent - have been acquired by the Hong Kong-based Goldin Group for undisclosed amounts.

The major tech company acquisition by any Chinese company was in 2005, when Lenovo acquired IBM's PC business (US based). Ever since, Lenovo has  strengthened its PC business to emerge as No. 2 personal computer vendor by unit sales.

Lenovo's slew of acquisitions has also sparked off market talk that it might be interested in IBM Corp's server business, as well as handset makers Research In Motion and Nokia Oyj.

Lenovo has cash totaling $4.5 billion, vastly outweighing a debt of $423 million, and giving it the muscle for more buyouts.

Why Huawei wants to acquire Nokia

Nokia's current market value is estimated at $14 billion with cash reserves of $13 billion. According to some calculations, Nokia's patent portfolio alone might be worth nearly $10 billion.

The Chinese telecom giant, Huawei, sits on a huge cash pile. It's overall net profit is reported at CNY 15.4 billion, which is a 33 per cent increase from the previous year. Furthermore, the manufacturer expects its global sales revenue to reach CNY 220.2 billion, an 8 per cent year-on-year increase.

Huawei's mobile product portfolio, however, has been described as 'solid', but not 'groundbreaking'.

Despite attempts to expand its smartphone operations outside of China and Asia, Huawei's efforts haven't proven fruitful. Huawei is definitely a force to be reckoned with in China, but elsewhere around the world, it's yet to prove that it understands Western consumers. Huawei hasn't demonstrated that it can appeal to consumers in both markets, even if it were given the chance to compete in the U.S..

The first is that smartphones only make up half the mobile phones sold in the world today - 49.3 per cent of the 426 million sold in the first quarter, to be precise. That percentage is steadily increasing, but it will probably take years, even decades, for all smartphones to completely take over.