Nokia Siemens buys Motorola network ops for $1.2 billion
Nokia Siemens Networks will buy Motorola's telecom network equipment business for $1.2 billion, getting a bhold in the North American market and taking No 2 position in the cut-throat mobile gear market.
The deal will leave only a few players in the consolidating sector, with Ericsson, China's aggressive newcomer Huawei and NSN the best survivors.
Nokia Siemens Networks -- a 50-50 joint venture of Nokia and Siemens -- has struggled to make a profit in the $82 billion market, which was hit hard by the recession.
But under Chief Executive Rajeev Suri the group has started to seek growth more aggressively and fight back against market leader Ericsson and Huawei, former number two.
An NSN spokesman said the cash deal would be financed from the company's existing reserves and financing agreements.
Nokia Siemens Networks said it expects the deal to give it incumbent relationships with more than 50 telecom operators and to strengthen its position with major carriers like China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone.
Motorola's mobile network business controls just 3 percent of the global market, but it is a market leader in WiMAX technology, and has a b footprint in CDMA technology -- giving Nokia Siemens a good position to sell next generation network technologies.
"The acquisition is timely given Nokia Siemens' ambition to grow its revenues in North America," said Paolo Pescatore, analyst with British consultancy CCS Insight.
Nokia Siemens tried to build a position in North America through an acquisition last year, but lost out on two major auctions of assets from bankrupt Canadian rival Nortel: first to Ericsson and then to Ciena Corp.
Both companies paid 0.57 times annual revenues for the Nortel business units. Nokia Siemens is paying 0.32 times annual revenues of $3.7 billion at the acquired Motorola business.
Some analysts questioned the deal due to Motorola's tiny market share -- just 3 percent globally -- and due to tricky integration of 7,500 staff and multiple product lines.
"It is a desperate attempt to gain market share in the U.S. after the twice failed attempts to buy Nortel's CDMA and Metro Ethernet businesses," said Earl Lum, founder and chief of industry research firm EJL Wireless.
"The integration of the personnel and the manufacturing facilities and supply chain will prove to be challenging in addition to the differences in corporate cultures," he said.
Nokia Siemens has struggled to take a larger share of North American business on its own. Revenues shrank 9 percent in the first quarter to 153 million euros ($198.5 million), making up just 6 percent of the group total.
In contrast, Ericsson generated revenues of 9.5 billion Swedish crowns ($1.3 billion) in North America the same quarter, 21 percent of the group total, helped by its Nortel asset buy.
The deal makes Nokia Siemens the third largest player in North America after Ericsson and Alcatel-Lucent.
Market research firm Gartner has predicted the overall market to shrink 2 percent this year after a 7-percent fall in 2009, and even the most optimistic industry players see only slight growth ahead.
Smaller vendors, like Motorola, have already focused on picking a limited number of deals and technologies they can succeed in -- especially after Canada's Nortel filed for bankruptcy last year.
Shares in Nokia were 1.6 percent higher at 6.88 euros, while in the United States Motorola stock was 1.3 percent higher at $7.60 by 1338 GMT.
Nokia Siemens Networks and Motorola said they were also exploring combining Motorola's public safety offering with NSN's commercial LTE solutions.
[Source: By Tarmo Virki, European technology correspondent, Reuters, Helsinki, 19Jul10]
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