MSI Motorola Solutions Inc

In a significant move, Motorola Solutions Inc. (MSI) and Huawei Technologies Co. Ltd. have decided to settle a pair of lawsuits over intellectual property rights between them. This is important because the out-of-court settlement between this two entities will clear the long pending sale of wireless infrastructure assets of Motorola to Nokia Siemens Networks (NSN), a 50-50 joint venture between Nokia Corp. (NOK) and Siemens AG (SI).

Motorola is hopeful that this deal will get regulatory clearance of the Chinese authority by April 29, 2011. The deal was initially expected to close by the end of 2010 and was viewed as a major thrust for the struggling NSN to boost its business footprint in the lucrative markets of the U.S., Japan and the Asia-Pacific region. As of now, NSN has received regulatory approval from the U.S., European Union, Brazil, Japan, Russia, South Africa, Taiwan and Turkey.

In July 2010, NSN entered into an agreement to purchase all of GSM, CDMA and WCDMA technologies as well as next-generation (4G) WiMAX and LTE technologies of Motorola for a total consideration of $1.2 billion in cash. In January 2011, Huawei Technologies of China sued Motorola Solutions, Nokia and Siemens, who are related to this deal.

As per Huawei, it had a 10-year agreement with Motorola for which the latter sold re-branded Huawei GSM equipment since 2000. However, Huawei claimed that the agreement does not allow Motorola Solutions to sell Huawei’s patented GSM technologies to any third party.

In February 2011, Huawei won a major legal battle when a U.S. federal court barred Motorola from disclosing any GSM technology to NSN that was patented by Huawei. NSN and Huawei are close competitors throughout the world.

In another interesting move, immediately after this announcement, Motorola Solutions filed with the U.S. SEC stating that the deal size has been reduced from $1.2 billion to $975 million. However, the company did not cite any reason for this truncated deal size.

Last month, Bloomberg reported that NSN is in the process of restructuring the original deal excluding the GSM network technologies of Motorola. Consequently, the financial consideration is expected to be reduced and resettled. However, neither Motorola nor NSN has confirmed this report.

We believe quick completion of the proposed acquisition deal is of utmost necessity for NSN. Globally, NSN currently holds the second position with a market share of 21.4%. Huawei is breathing down its neck with a market share of 17.9%. After acquiring Motorola wireless infrastructure assets, NSN’s position will be more consolidated.

We believe NSN will be way ahead of other wireless network vendors except L.M. Ericsson AB (ERIC), the undisputed market leader with a 36.9% global share. Similarly, Motorola Solutions will also get the much needed cash for expansion into the lucrative public safety market.

 
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