[Infowarrior] - Nokia buys Motorola Wireless Unit

[Richard Forno]

Nokia Siemens to Pay $1.2 Billion for Motorola Unit

July 19, 2010, 8:04 AM EDT

http://www.businessweek.com/news/2010-07-19/nokia-siemens-to-pay-1-2-billion-for-motorola-unit.html

July 19 (Bloomberg) -- Nokia Siemens Networks, the world’s second-largest maker of wireless phone systems, said it will pay $1.2 billion for wireless network assets from Motorola Inc. to expand in North America and Japan.

The joint venture of Nokia Oyj and Siemens AG will gain more than 50 customer relationships, it said in a statement today. Nokia Siemens said it would gain about 7,500 employees in the deal, which is predicted to close by year end. The transaction will enhance profitability and cash flow, it said.

Nokia Siemens Networks, based in Espoo, Finland, wants to boost its presence in North America to compete with larger rival Ericsson AB and faster-growing competitors such as China’s Huawei Technologies Co. Nokia Siemens unsuccessfully bid twice for assets belonging to Toronto-based Nortel Networks Corp. during the past year after the telecommunications-equipment maker filed for bankruptcy protection and sold off units.

“It’s a positive for Nokia Siemens,” Pierre Ferragu, a London-based analyst with Sanford C. Bernstein, said in an interview. “It’s good for them to get a foothold in North America, especially as this is going to be the strongest telecoms market” over the medium term, he said. Ferragu has a “market perform” rating on Nokia and an ‘outperform” rating on Motorola.

Trimming Expenses

Nokia Siemens has been cutting jobs and shutting offices to adjust to falling demand and price competition from Ericsson and Huawei. Nokia Siemens Chief Executive Officer Rajeev Suri said in November the company planned to expand through acquisitions and partnerships while trimming its existing operations.

“More scale for NSN makes sense,” Jason Willey, an equity analyst at Standard & Poor’s, said in an interview July 16. “They have a hole where they really need stronger ties to customers in the U.S. and anything they could do to improve their scale and presence there would be a positive.”

Nokia Siemens said the acquisition will strengthen its ties to operators Verizon Wireless, Sprint Nextel Corp. in the U.S., KDDI Corp. in Japan, China Mobile Ltd., and Vodafone Group Plc.

The wireless business at Nokia Siemens is rooted in the GSM standards used by most carriers outside the U.S. and east Asia. Motorola sells GSM systems as well as gear based on CDMA, which is used by some North American and east Asian carriers and so- called fourth-generation technologies LTE and WiMAX.

Motorola, based in Schaumburg, Illinois, is hanging on to a technology it developed called iDEN, it said in the statement.

Spinoff

Motorola’s sale of the wireless-network unit prepares it for a broader restructuring. The company is planning to spin off its mobile-phone and set-top box operations into a company that will be led by co-Chief Executive Officer Sanjay Jha. The spinoff is on schedule for the first quarter, Jha said last month.

“They’re getting rid of this asset for a very good price and it’s a good step towards the break-up plan” which will help them to be well capitalized next year,” Ferragu said.

Sales from the wireless networks business fell 7 percent to $896 million last quarter from a year earlier, accounting for 18 percent of Motorola’s total revenue. The division’s operating profit climbed to $112 million from $62 million a year earlier, helped by contracts it won from companies such as China Mobile.

Over the past decade, telecommunications-equipment companies have combined to cope with declines in spending by some customers. France’s Alcatel SA acquired Lucent Technologies Inc. in 2006 to create Alcatel-Lucent, a Paris-based rival to Nokia Siemens.

New Technologies

Nokia Siemens is the world’s second-largest maker of wireless phone systems behind Ericsson and roughly even with Huawei, according to Redwood City, California-based researcher Dell’Oro Group. Motorola is the fourth-largest company in CDMA wireless systems, according to the researcher.

“The margins that Ericsson has been able to squeeze out of Nortel’s wireless business and the demand in that business has so far been stronger than we expected,” Willey said. “This indicates that some of those older technologies are going away slower than people expected -- there’s still more investment to be made in things like CDMA and iDEN.”

--With assistance from Jeffrey McCracken. Editors: Robert Valpuesta, Simon Thiel.

To contact the reporter on this story: Diana ben-Aaron in Helsinki at dbenaaron1 at bloomberg.net; Hugo Miller in Toronto at hugomiller at bloomberg.net.

To contact the editor responsible for this story: Vidya Root in Paris at vroot at bloomberg.net; Peter Elstrom at pelstrom at bloomberg.net