French communications equipment manufacturer, Alcatel, is studying ways to end losses in its mobile phone unit that could include the complete sale of the business.
"We are reviewing all kinds of solutions," Alcatel spokesperson, Régine Coqueran, said. "These could include a sell-off, a partnership or whatever it takes to end losses."
While Alcatel has set no hard deadline for making a decision on the future of its underperforming mobile phone unit, the company aims to have a solution by the end of the year at the very latest, the spokesperson said..
"All the big players have indicated that to achieve scale, they need about 10 per cent of the market," senior analyst with Gartner, Ben Wood, said. "Alcatel has less than 2 per cent, according to our figures."
Coqueran declined to comment on a news report in the French newspaper, La Tribune, claiming the Paris-based company was poised to sell the unit to Chinese manufacturer Nanjing Panda Electronics Company.
A deal with a Chinese company would make tremendous sense, Wood said.
"For Alcatel, this would unlock access to potentially the biggest and fastest growing mobile phone market in the world," he said. "And for a Chinese partner, it would open the door to Europe."
Wood said Chinese manufacturers realised that mature markets, particularly Western Europe, were driven by brand as well as technology.
"If a Chinese manufacturer could win a European partner like Alcatel, which has a trusted brand in several countries, it would be in a much better position to conquer market share rather than trying to establish its own brand identity," he said.
Who that partner could be is currently a matter of intense speculation. In addition to Panda, which already has a joint venture with Sweden's Ericsson, TCL Mobile Communication is rumoured to be another company in talks with Alcatel.
Although close to the French company, Singapore's Flextronics is viewed by Wood as an unlikely candidate. In 2001, Alcatel outsourced its handset production to Flextronics in a move to lower costs and stem losses. But by taking over this unit lock, stock and barrel, the Asian partner would jeopardise its manufacturing contracts with other handsets suppliers, including Sony Ericsson Mobile Communications, he said.