Nokia, Siemens Plan Venture
Nokia Corp. and Siemens said Monday they would combine their network equipment units in a reported $30-billion joint venture to more effectively take on market leader Ericsson.
The combination, to be called Nokia Siemens Networks, would create one of the largest players in the industry, with $20 billion in annual sales. Besides Ericsson, it also puts pressure on Lucent Technologies Inc., Alcatel, Motorola Inc. and Nortel Networks Corp.
The 50-50 venture would comprise Nokia’s network business group and Siemens’ carrier-related operations, creating estimated savings of $1.9 billion by 2010 through an estimated 9,000 job cuts globally, Nokia said.
“The new company will and has to have an attitude of a challenger -- fiercely competitive with an unerring focus on the customer -- because at the end of the day, eventually, it is the customer who will decide,” said Pekka Kallasvuo, Nokia’s new chief executive.
As the communications industry consolidates, he said, Nokia Siemens Networks would be well-positioned to help customers -- carriers and service providers -- lower costs and increase revenue while managing the challenges of converging technology. Customers never see the equipment, but experience it through more reliable service, faster connections and more features.
The deal is the latest in a wave of consolidation that began last October, when Ericsson agreed to buy Marconi Corp.’s broadband Internet and telecommunications assets for about $2.1 billion.
In April, Alcatel launched a $13.4-billion stock swap for Lucent Technologies Inc.
The Siemens-Nokia venture is likely to put pressure on Motorola, which will drop from the No. 3 provider of network equipment to No. 4. Also left out is Nortel Networks.
Shares of Munich, Germany-based Siemens jumped $4.10 to $83.90 on Monday while Nokia of Espoo, Finland, gained 12 cents to $20.09.
Analysts have said there are an estimated 2.5 billion cellphone users around the world, a figure that is expected to increase as handset prices fall and operators lower subscription prices.
Mobile services providers are increasingly looking for the technology and equipment that will let them provide bigger, faster and better content to subscribers.
“Nokia has had difficulties being real strong on the network side. Now they will have a better position and this will also help on the cellphone side,” said David Larsson, an analyst with IT Research in Stockholm.
Siemens Chief Executive Klaus Kleinfeld said the deal would position the new company to tackle Ericsson, which is the top maker and seller of network equipment.
Siemens and Nokia declined to place a value on the deal. The New York Times and the Wall Street Journal reported it at more than $30 billion, citing unnamed people familiar with the transaction.
The new company will have about 60,000 employees and be based in Helsinki, Finland. It also will have key offices in Munich.
Kallasvuo took over as CEO on June 1 from Jorma Ollila, who during 14 years at the helm turned Nokia into the world’s largest mobile phone maker.
The joint venture was expected to be finalized by the end of the year, pending regulatory approval, and both companies said that between 10% and 15% of staff positions, or about 9,000 jobs, would probably be cut over the next four years in a bid to save $1.9 billion.
Nokia employs 62,000 people. Siemens, Europe’s largest electronics and electrical engineering company, employs more than 460,000 people.
