NSN Abandons Stake Divestment Plan - Analyst Blog
July 15 2011 - 4:45AM
Zacks
Nokia Siemens Networks (NSN), a
50-50 joint venture between Nokia Corp. (NOK) and
Siemens AG (SI) to provide telecom infrastructure
solutions, has suffered a setback. For the last 12 months, NSN was
looking for a third party investor in order to inject funds,
thereby reducing the stake of both Nokia and Siemens. Recently, the
company stated that it has abandoned its equity disinvestment plan
for the time being.
In June 2011, The Financial Times
reported that the two major U.S. private equity groups, Kohlberg
Kravis Roberts and TPG, have backed out from their bidding for a
significant stake in NSN. The departure of these two private equity
groups primarily resulted from disagreement between the firms and
NSN over price and controlling stake of the venture. Nokia and
Siemens are at present trying to infuse more cash in their joint
venture in order to revamp its businesses. The venture may look for
further headcount reduction in order to streamline costs.
Despite being the second largest
company in this field after LM Ericsson AB (ERIC),
NSN always remain in sticky wicket once it was formed in 2007.
Huawei and ZTE, the two Chinese telecom infrastructure
manufacturers, are fighting neck and neck with NSN to capture
global market share. In the previous quarter, adjusted operating
margin of NSN was 0.1% compared with 0.6% in the prior-year
quarter.
Industry sources rumored that
Siemens does not consider NSN as a part of its core business and
the company is looking to exit from the venture as soon as
possible. On the other side, although telecom network
infrastructure solution is an integral part of Nokia’s core mobile
handset business, the company is at present giving its full
emphasis in its upcoming Microsoft Corp. (MSFT)
developed Windows Phone 7-based smartphones.
Nevertheless, during the last six
months, the NSM improved its financial conditions from a year-ago
primarily attributable to a surge in 3G network deployment in the
emerging countries. In April 2011, NSN completed the long-waited
acquisition of network gear businesses of Motorola
Solutions Inc. (MSI) for $975 million. This acquisition
may help NSN to get a foothold in the lucrative CDMA markets of
North America, which remains the major drawback of the venture.
ERICSSON LM ADR (ERIC): Free Stock Analysis Report
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