Nokia Siemens Faces Shareholder Vote, Changes April 3

Siemens plans to walk away from the Nokia Siemens deal, leaving the question of how Nokia, which needs the business, will proceed.

The relationship between Nokia and Siemens may soon change, as a shareholder agreement of their Nokia Siemens joint venture faces a renewal April 3.

Siemens has said it plans to sell its half of what the pair has worked to convert from an albatross to an asset. According to the The Wall Street Journal, the value of the enterprise, which sells telecom equipment and competes against Ericsson, Alcatel-Lucent, Huawei and ZTE, to be between $8 billion and $10 billion.

During Nokia's fourth-quarter 2012 earnings announcement Jan. 24, it said that the Nokia Siemens Networks had posted improved operating margins both quarter-on-quarter and year-on year, reaching its "highest level of underlying operating profitability since its formation in April 2007."

Stephen Elop, since becoming CEO of Nokia, just over two years ago, has overseen the Nokia Siemens transition, which has included a dramatic reduction of its workforce and the selling of assets.

In late 2011, shortly after announcing plans to let go of 17,000 of its 74,000 employees, Nokia Siemens sold its WiMax wireless business to NewNet Communications.

Earlier this month, it announced plans to sell 800 million euros worth of bonds, in an effort to make the venture "more independent," a development that Elop has called for. Proceeds from the sale, Nokia announced March 22, after increasing the amount from originally 600 million euros, will be used to prepay existing debt and go toward "general corporate purposes."

On March 30, Redknee announced that it had completed its acquisition of the Nokia Siemens Networks' Business Support Systems (BSS) for $52.2 million. As part of the deal, Redknee will receive intellectual-property assets and a list of 200-plus customers across 90 countries. It will also receive 1,200 employees located in Germany, India and Poland.

While Siemens is ready to walk away from the partnership, Nokia needs it more than ever. During its January report, Nokia said that it had strengthened is net cash position by approximately 800 million euros, 650 million of which was generated by Nokia Siemens.

The Nokia brand may represent smartphones, but increasingly bolstering its smartphone operations are its networks investment—making it extremely unlikely that Nokia will walk away from the venture any time soon.

Regarding how things might proceed, Morgan Stanley analyst Francois Meunier recently told investors that three outcomes are likely, The Journal reported.

The first is that Nokia finds a partner willing to back its taking on the whole shebang. The second is that it finds a new partner to replace Siemens. And the third is that there's an initial public offering.

Pierre Ferragu, an analyst with Bernstein Research, told The Journal that Nokia probably couldn't find a buyer for its ailing handset business—like every company but Samsung and Apple, Nokia has had a difficult time holding on to market share or acquiring new customers.

"Keeping the stake in Nokia Siemens Network is a very good way for Nokia to mitigate the problems the company faces in handsets," said Ferragu.

Nokia will announce the results of its most recent quarter April 18.