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Nokia has announced plans to acquire Siemens AG’s 50 percent share of Nokia Siemens Networks (NSN), the joint venture the pair established in 2007 and the strongest asset on Nokia’s balance sheet.
Nokia plans to pay Siemens the U.S. equivalent of $2.2 billion, and the deal is scheduled to close during the third quarter.
“Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity,” Nokia CEO Stephen Elop said in a July 1 statement. “Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group.”
Siemens Chief Financial Officer Joe Kaeser said the deal will help Siemens focus on the areas of energy management, “industry and infrastructure,” and healthcare.
It will also, he added, help Nokia “actively shape the telecom equipment market for the future and create sustainable value.”
Chris Nicoll, principal analyst at Analysys Mason, called the deal a strategic move to strengthen both the Nokia and NSN brands “by leveraging both ends of the mobile connection—similar to what Samsung is doing.”
By pushing its Lumia devices and growing its LTE position, Nicoll wrote in a July 1 research note, “Nokia is taking advantage of the opportunity to re-establish the company’s mobile market leadership in the growing LTE market, particularly in the European markets where NSN is an incumbent network supplier in many networks.”
Samsung recently introduced a Galaxy smartphone capable of accessing LTE-Advanced technology, and Nicoll wrote he expects Huawei, which makes both smartphones and telecom equipment, to soon do the same.
“Apparently Nokia also thought it needed full control over both sides of the connection, and I expect it will use the control to speed to market more advanced networking features,” Nicoll wrote.
Nokia, once the world’s leader in mobile phone sales, has struggled to compete against the Apple iPhone and Android-running Samsung devices. Two years ago it transitioned from the Symbian operating system to Microsoft’s Windows Phone platform, but that bet has yet to pay off in a substantial way.
As it works to build interest in its Lumia-running Windows Phone line, Nokia has tightened its belt by letting go of at least 10,000 employees and selling and leasing back its headquarters.
In recent months, Microsoft was reportedly negotiating to buy Nokia, though talks fell apart on the issue of price, sources said. Analyst Ken Hyers, with Strategy Analytics, told eWEEK it’s easy to imagine a tension between what Nokia believes its brand is worth, based on its former glory, and what Microsoft believes the brand is worth, based on its current market reality.
During Nokia’s most recent earnings call on April 18, CFO Timo Ihamuotila said Nokia saw increases in Lumia shipments in all regions but North America, and that NSN had “another solid quarter.”
“I am very pleased that NSN has been able to deliver on one of my key cash focus areas, namely to be self-financing in all aspects of its operations,” Ihamuotila said.
He called this an “important part of NSN’s progress towards becoming a more independent entity” and said that Nokia will continue to looks at NSN “in a prudent and pragmatic way with the aim of maximizing value for our shareholders.”
Nokia’s board of directors has approved the deal, as has Siemens’ supervisory board. Nokia said it plans to eventually phase out Siemens from the name and confirm the new name and branding plan when the transition closes.