Nokia shares gain on report of Cisco interest

Nokia shares rose over 3 percent on Monday after a newspaper report that Cisco Systems Inc is mulling a bid for the top mobile phone maker to get hold of its wireless infrastructure technology. At 1022 GMT, Nokia's shares were up 2 percent at 13.19 euros, having earlier touched 13.35, outperforming the DJ Stoxx technology index, which was up 0.85 percent.
The Business newspaper reported on Sunday, without identifying its sources, that Cisco's Chief Executive John Chambers was believed to be interested in merging with a wireless infrastructure company.
It said Cisco had identified Finland's Nokia as the most likely target, although the US-based firm has previously focused on acquisitions of niche technology players.
Cisco declined to comment on the London newspaper report. Nokia spokeswoman Arja Suominen said the article seemed to be "pure fabrication based on rumours on the Internet".
Nokia has previously said it did not plan to sell the networks division, which it considers part of its core business. The unit is the world's second-largest mobile infrastructure maker after Sweden's Ericsson.
Marko Alaraatikka, a fund manager with Finnish-based Evli, said it would make sense for Cisco to acquire Nokia's networks operations, which has annual sales of 6.4 billion euros ($8.07 billion), and made up 22 percent of Nokia's turnover in 2004.
"Buying (Nokia's) networks division would be good for Cisco ... if they want to diversify into wireless networking," said Alaraatikka, who helps manage 3.5 billion euros in assets.
"But for Nokia, I think they would ask a pretty high price for it," said Alaraatikka, whose funds hold Nokia stock.
Cisco, the largest maker of Internet equipment, is worth about $123 billion, while Nokia's market value is around $71 billion.
Credit default swaps on Nokia were unmoved by the report, with five-year default swaps indicated at 21.5 basis points, which means it costs 21,500 euros a year to insure 10 million euros of debt against default.
The Business said Cisco's mainstay networking market was changing fast with the convergence of fixed-line and wireless networks, and the company needed technology for intelligent wireless applications, which Finnish-based Nokia could provide. Several analysts were sceptical about the report.