Nokia agrees to buy out Siemens' stake in joint venture


Nokia Siemens Networks makes telecommunications equipment for companies.

Nokia is best known among consumers for its Windows Phone devices, though a large portion of the company is its telecommunications equipment joint venture with Siemens, Nokia Siemens Networks. That entity won't be a joint venture much longer, however, as Nokia has agreed to purchase Siemens' portion.

The two companies issued a joint press release announcing that Nokia will buy Siemens' entire stake in the joint venture for 1.7 billion euros (about $2.2 billion). Following regulatory and company approval, which is expected to occur before the end of the year, the entity will be folded into Nokia as a subsidiary. In terms of day-to-day operations, little is expected to change as the entity will retain its management team and continue with a previously planned restructuring.

Nokia will pay 1.2 billion euros in cash when the transaction is completed though the use bank financing; when the deal is finalized, the Siemens name will be removed. The remaining amount will be paid in the form of a secured loan one year after the deal is closed. Prior to the deal's announcement, Bloomberg BusinessWeek reported that Siemens had been looking to exit the venture for years so it could focus on its other businesses.

The joint venture was unprofitable for both companies until last year, and it could possibly see improved margins that Nokia has been lacking from its smartphone sales. Nokia sold 5.6 million Lumia devices last quarter, though it still posted a net loss of 150 million euros (about $159 million).

In a statement released by the companies, Nokia CEO Stephen Elop called his company's impending division an "attractive growth opportunity."

"With its clear strategic focus and strong leadership team, Nokia Siemens Networks has structurally improved its operational and financial performance," he said. "Furthermore, Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity. Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group."

Last week, Nokia held an unscheduled board meeting regarding "key decisions on the future of the company." It's not known if that meeting was related to the purchase from Siemens or rumors that Microsoft was recently in talks to purchase the company's devices division. Those discussions were said to have been shelved and are unlikely to resume as a price couldn't be agreed upon.

Source: Nokia | Image via Nokia Siemens Networks

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17 Comments

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Nokia just need to wait for the HTC and Samsung fad to die down now just like the apple one. (they will loose a little from paitent sales) but get a **** loads in handset sales.

I don't own a W8 phone but i would love to and even more i would like it to take off i think the idea of windows 8 was a good one with xbox. pc. phone etc etc all using a similar OS its nice for development.

Nashy said,
Mobile phone and cell equipment on the books. Didn't work out great for Ericsson.

Or maybe going into a deal with Sony didn't? It was always their joint Sony-Ericsson mobile partnership that lagged behind.

Ha ha that must be why Sony's smartphone shipments for 2012 jumped to 33 million units after breaking up with Ericson while Nokia's plummeted and are fighting to stay in the top ten after the Lumia deal, and now this. Looks like they are tying a milestone around their neck before jumping off the 'burning platform' aka Windows Phone.

recursive said,
Ha ha that must be why Sony's smartphone shipments for 2012 jumped to 33 million units after breaking up with Ericson while Nokia's plummeted and are fighting to stay in the top ten after the Lumia deal, and now this. Looks like they are tying a milestone around their neck before jumping off the 'burning platform' aka Windows Phone.

Well if you had the brains to realize that the mobile market is not just about the US, you'd see that Nokia is in a very dominant position in many countries in Asia and Europe (I'm talking about just the Lumia line).

But hey, whatever helps you sleep at night.

GP007 said,

Or maybe going into a deal with Sony didn't? It was always their joint Sony-Ericsson mobile partnership that lagged behind.

To be honest, i think the SonyEricsson helped Ericsson. prior to the deal, from what I saw Ericsson weren't actually doing well. My personal view is that if Sony hadnt come along, Ericsson wouldn't have lasted in the mobile phone device business as long as they did.

This could work out very well, if Nokia can make deals to sell a Telco the backend equipment they need for a good price they could also work in some Lumia deals in the process.

Wow, I was sure they were planning to sell their piece of the operation. It would have made sense since it's one of the few profitable pieces of Nokia.

macel said,
Wow, I was sure they were planning to sell their piece of the operation. It would have made sense since it's one of the few profitable pieces of Nokia.

THey just worked so hard to make it profitable and they'd sell it? Now this way they'd get to keep more of the profits and not share them with Siemens.

GP007 said,

THey just worked so hard to make it profitable and they'd sell it? Now this way they'd get to keep more of the profits and not share them with Siemens.

That is after they recoup the cost of $2Bn which will take time.

StandingInAlley said,

That is after they recoup the cost of $2Bn which will take time.

No doubt, but I think they can better offer deals to telcos now as well as offer deals on Lumia phones as well.

spy beef said,
Where did they get 2.2 billion? Last I heard they were doing bad.

While it's true that Nokia has been in the red they're not broke. Last I heard they had ~$4 billion or so still in the bank.

GP007 said,

While it's true that Nokia has been in the red they're not broke. Last I heard they had ~$4 billion or so still in the bank.


And they really aren't doing "bad", they have slowly been turning their profitability around. It takes time, but they're on the right track.

GP007 said,

While it's true that Nokia has been in the red they're not broke. Last I heard they had ~$4 billion or so still in the bank.

Nokia will have $3.65 billion in net cash after buying out Siemens.

Before buying out Siemens, they had €4.5 billion, or $5.87 billion, in net cash.

What's more, Nokia is cash-flow positive, to the tune of €442 million over the past four quarters. So long as their position continues to improve rather than deteriorate, they will be able to pay for the deal from cash flow.