Siemens officials over the past few months have been fairly vocal in their desire to get out of their 6-year-old joint enterprise networking venture with smartphone maker Nokia.
Now the company seems poised to act on that desire.
Siemens officials are talking with private equity firms about possibly buying Nokia Siemens Networks, according to a June 14 report in The Wall Street Journal. Citing unnamed “people familiar with the matter,” the newspaper said Siemens has talked with such firms as TPG, Blackstone Group and KKR about buying the entire joint venture, which some analysts have that—if it were a public company—could be worth as much as $9.36 billion.
A less likely possibility would be selling Siemens’ part of the joint venture, according to the Journal’s sources. A third option, if no deal to sell all or part of the company is reached, would be an initial public offering (IPO), according to reports, which could help it quickly generate a lot of money.
The two companies created the joint venture six years ago to sell networking equipment to enterprises and service providers. However, competition in the market has become increasingly competitive, not just from U.S.-based vendors like Cisco Systems and Hewlett-Packard, but also companies from Asia, such as Huawei Technologies.
Nokia Siemens has gone through several rounds of layoffs—cutting about a quarter of its global workforce—and restructurings over the years as it looked to remain competitive in the space, though it reportedly has seen its valuation rise in recent quarters as it’s focused on 4G wireless technologies. However, in recent months, Siemens officials have been talking about finding ways to get out of the venture, with Chief Financial Officer Joe Kaeser saying earlier this year that Nokia Siemens Networks “is not a business that we have any aspirations to stay [in],” according to the Journal.
That kind of talk began to ramp up when the April 3 date for renewal of the company’s shareholder agreement was approaching. Siemens officials began broaching the idea of selling its half of the joint venture around then, and the renewal included the clause that allows Siemens and Nokia to assess their options for the joint venture without having to worry about the other company vetoing a plan.
However, while Siemens officials seem anxious to explore those options, their Nokia counterparts are most likely less enthusiastic. The company in recent years has been battered in the mobile phone business by Apple’s iPhone and the myriad smartphones running Google’s Android operating system. Nokia, under the guidance of CEO Stephan Elop, has embraced Microsoft’s Windows Phone OS and slashed expenses—including jobs—in an effort to stabilize its finances.
It has been helped by the Nokia Siemens joint venture. Earlier this year, Nokia officials said the company had strengthened its cash position by more than $1 billion, $866 million of which was attributed to Nokia Siemens.
According to The Wall Street Journal, Nokia officials have been trying to pull together the funding that would enable it to buy Siemens’ half of the joint venture, including talking to Solidium, the sovereign-wealth fund in Nokia’s home base of Finland. However, there are challenges in that approach, according to the newspaper.