Nokia hedges its bets, buys out Siemens stake in network business for $2.2 billion
Nokia has announced it’s to buy out Siemens’ share in Nokia Siemens Networks for a total cost of 1.7 billion euros, or $2.2 billion. The partnership has been in operation since 2007, with the pair owning a 50/50 stake, but the agreement ended earlier this year when it was speculated the business would be sold. After the partnership ended in April, analysts speculated the company could go public, or that Siemens would be bought out by a rival, with Alcatel Lucent being named in one report. The telecoms industry is as competitive as the smartphone industry, with Huawei and Ericsson – which recently had a split of its own – being two of the major players.
Nokia’s decision to purchase the company could be seen as hedging its bets – a safety net in case its smartphone business ultimately fails. An analyst for Bernstein, speaking to Reuters, agrees; “With this transaction,” he’s quoted as saying, “Nokia buys itself a future, whatever happens in smartphones and feature phones.” It’s apparently got itself a bargain too, as Nokia Siemens Networks made a profit last year, and its worth has been estimated at between 3.4 billion and 5 billion euros.
Nokia doesn’t even have to stump up the whole amount right away either, as it’s paying 1.2 billion euros up front, in cash, with the remainder coming in the form of a secured loan from Nokia Siemens itself. Nokia CEO Stephen Elop called the acquisition, “an attractive growth opportunity,” due to the company’s knowledge and investment in LTE technology, and confirmed the company would continue to function independently.
Despite leading the industry in Windows Phone hardware sales, Nokia is still struggling to pull itself back from the brink, following the rise of Apple and Samsung. In a previous interview, Stephen Elop has said although the firm is focused on Microsoft’s mobile OS at the moment, it’s always asking itself, “What’s next.” By taking on Nokia Siemens, it’s shown not only are Android, Firefox OS, and others on the table, but also networks and backhaul too.
By Andy Boxall