Nokia Buys Siemens Stake in Equipment Venture for $2.2 Billion - Businessweek

Nokia Oyj (NOK1V) has agreed to buy Siemens AG (SIE)'s stake in the companies' telecommunications-equipment joint venture, according to three people familiar with the situation. Nokia, based in Espoo, Finland, may announce as soon as today a deal to buy Siemens's 50 percent shareholding in Nokia Siemens Networks, the people said, asking not to be identified because the discussions were private. Nokia will pay less than 2 billion euros ($2.6 billion) and use a bridge loan to help finance the purchase, one of the people said. Siemens has been seeking to exit the wireless-gear business for several years to focus on its main divisions of energy equipment, healthcare and rail. For Nokia, struggling to gain traction in the smartphone industry, the transaction gives it full control of a business whose earnings have been improving since it returned to profit last year. "We see this as a positive and negative for Nokia," said Pierre Ferragu, an analyst at Sanford C. Bernstein in London. Such a transaction gives "a more tangible long-term future for the group, but a tighter balance sheet for hardship to come." Munich-based Siemens, which manufactures products from power turbines to high-speed trains, renewed efforts to sell its stake earlier this year, holding talks with buyout firms about a potential transaction, according to two people familiar with the talks. A Siemens spokesman declined to comment. Nokia representatives couldn't immediately be reached for comment. Unprofitable until early last year, Nokia Siemens's earnings have improved thanks to cost cuts. The Espoo, Finland-based venture is on track to exceed its target of saving 1 billion euros in operating expenses by the end of this year, Chief Executive Officer Rajeev Suri said in February. Failed Talks Nokia and Siemens abandoned talks with private-equity buyers in 2011 over a sale of the business as the buyout firms failed to come up with a compelling offer. Nokia Siemens then started a program in late 2011 to cut 17,000 jobs, or about 23 percent of the total. Competition from Asian rivals Huawei Technologies Co. and ZTE Corp. prompted Nokia Siemens and its western rivals such as Ericsson AB and Alcatel-Lucent SA to cut jobs. Nortel Networks Corp. went bankrupt in 2009. Nokia Siemens Networks had about 56,700 employees at the end of the first quarter and supplies companies such as Deutsche Telekom AG and Cisco Systems Inc. Smartphone Struggle Nokia reported in April its smallest quarterly revenue in 13 years as handset demand waned. Its first-quarter sales fell 20 percent as competition from Asian manufacturers building phones that run Google Inc.'s Android software hurt demand for Nokia's basic handsets. Nokia's net cash increased to 4.5 billion euros from 4.4 billion euros at the end of December. Nokia's debt is at junk status with the three main rating companies. In January, Nokia scrapped its dividend for the first time in at least 143 years to bolster its liquidity position. The deal may help Siemens CEO Peter Loescher, who this year announced the fourth profit forecast cut in his six-year tenure, to focus on the company's main businesses to reach a target for matching profitability at General Electric Co. and ABB Ltd. Loescher, an Austrian national who joined Siemens in 2007 from drugmaker Merck & Co. as the first CEO hired from outside the company, started a savings program last year after acknowledging he had been slow to react to the economic downturn. The CEO is also under pressure after some deals that he supervised soured and a push into environmentally friendly energy led to spiraling costs. Europe's largest engineering company this year announced the closure of its loss-making solar unit, and is also selling water technologies, parcel automation, airport logistics and air freight units, while its Osram Licht AG lighting unit will be spun off. "While NSN has made significant progress, it's still in an environment which is a tough one," Siemens Chief Financial Officer Joe Kaeser told analysts May 2, adding that he expected "results to be volatile going forward in the coming quarters." To contact the reporters on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net; Jacqueline Simmons in Paris at jackiem@bloomberg.net; Beth Jinks in New York at bjinks1@bloomberg.net To contact the editors responsible for this story: Simon Thiel at sthiel1@bloomberg.net; Heather Harris at Hharris5@bloomberg.net via Technology - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNHwPUeaNLknj7qfc3feo4daoXrt4A&url=http://www.businessweek.com/news/2013-06-30/nokia-said-to-agree-to-buy-siemens-stake-in-nsn-networks-venture

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