TI blames Nokia for second quarter dip

Trouble at a company as huge in its industry as Nokia has countless ripple effects. Texas Instruments is blaming reduced demand from the handset maker for a disappointing second quarter forecast, while Samsung joins the line-up of rumored suitors looking to cash in on the crash in Nokia's value.

The rumor that Samsung might bid for its larger cellphone rival is predictable but less credible than the similar speculation around Microsoft - though the deal would certainly make more sense for the Korean giant than the American. It is one of the few vendors with the scale and cost base to take on Nokia's manufacturing and supply chain, and make it more efficient rather than less. Samsung is all about huge volumes of devices, which used to be Nokia's forte too - whereas most mobile players are seeking clever software to differentiate themselves, and would struggle to integrate the Finnish player's activities.

However, Samsung resolutely refused to comment on the speculation, and it is unlikely to need the challenges of a massive cross-border merger, since it is best placed to take organic advantage of Nokia's decline in market share, especially in emerging economies. Some analysts believe various bids may be in the works for Nokia, but would-be acquirers will wait for the stock to fall further. So we will likely be deprived of the fascinating spectacle of a Finnish-Korean culture clash at the top of the handset leader board, though Nokia has been less emphatic in its denials than it was about the Microsoft reports - these got a denial from CEO Stephen Elop, who called them "baseless", while the Samsung rumor just got the standard "we don't comment on speculation" from representatives.

Nokia's share price has fallen by 46% in the past year on falling market share, concerns about its difficult transition to WP7, and successive profit warnings and credit agency downgrades. But Samsung does not ring true as an acquirer to many observers. "Samsung acquiring Nokia doesn't seem very feasible as the two companies are on quite different trajectory paths," Canalys analyst Pete Cunningham told TotalTelecom. "Samsung has seen tremendous growth and is launching new pads trying to target Apple, whereas Nokia is clearly going backwards losing market share very quickly. I don't see a lot of value in Samsung acquiring Nokia."

Ironically, the Nokia Siemens infrastructure joint venture might have more real value for Samsung, which is trying hard to become a significant player on the mobile networks front. Quite apart from Nokia's current woes, the NSN partners have made it clear they are open to new investors and NSN would be an obvious candidate for the Nokia break-up that some feel is inevitable to boost value. Microsoft would certainly be interested in the Navteq mapping business.

Amid all the uncertainty, key Nokia partners are suffering. Texas Instruments already suffered a hit a few years ago when the handset giant diversified its supply chain and this triggered the US firm's decision to exit the merchant baseband market and concentrate on applications and infrastructure processors, and its booming analog business. But Nokia remains an important customer, and TI said it was the main factor in a Q2 forecast that fell short of analyst expectations.

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