Bloomberg News

Nokia Siemens Sells Optical Network Business to Marlin

December 03, 2012

Nokia Siemens Networks, the phone- equipment venture of Nokia Oyj (NOK1V) and Siemens AG (SIE), agreed to sell its optical networks business to Marlin Equity Partners as part of its plan to reduce costs and focus on mobile broadband.

As many as 1,900 employees, mainly in Germany, Portugal and China, will transfer to a new company, Nokia Siemens said today in an e-mailed statement, without giving a sale price. The deal may be worth 200 million euros ($261 million), depending on the value of patents included, said Robert Jakobsen, a Jyske Bank A/S analyst in Silkeborg, Denmark.

Nokia Siemens, based in Espoo, Finland, and French rival Alcatel-Lucent SA are among telecommunications-gear providers that are cutting jobs and costs as the slowing global economy crimps spending on mobile-network infrastructure. In October, Nokia Siemens posted its first quarterly sales increase and profit since last year, helped by demand for long-term evolution, or LTE, networks that allow faster data speeds.

“Our strategic focus on our core markets has enabled us to concentrate our energy and investment in areas such as LTE,” Nokia Siemens Chief Executive Officer Rajeev Suri said in the statement.

Nokia Siemens said a year ago it would cut 17,000 jobs, or about 23 percent of the total, to become sustainably profitable. In October, the company said it had reduced its workforce by 14,300 from a year earlier.

Consolidation Ahead?

The deal with Los Angeles-based Marlin will probably close in the first quarter of 2013, and Marlin will help provide the funds to build a “leadership position´´ for the new company, Nokia Siemens said. The business will be based in Munich.

Of the 10 or so largest companies in the optical networking industry, no more than half will survive, Herbert Merz, the designated CEO of the new business, said in an interview. The business, which has annual sales of 400 million euros to 500 million euros, will try to boost revenue until it is level with larger rivals Huawei Technologies Co., Alcatel-Lucent and Ciena Corp. (CIEN:US), Merz said, declining to comment on profitability.

‘‘That’s not possible through organic growth only, but you cannot plan acquisitions,´´ Merz said. ‘‘We are not in negotiations with anyone right now, but there are strategic options for consolidation in our industry, and we don’t rule out any of them.´´

Profit Target

The sale of the optics business would help bring Nokia Siemens closer to its cost-cutting goal and boost its profit margin, said Janardan Menon, an analyst at Liberum Capital Ltd. in London. On Oct. 18, Nokia Siemens projected an adjusted fourth-quarter operating margin of 4 percent to 12 percent.

The company vies with Huawei for the second spot in the global wireless-gear market behind Ericsson AB (ERICB) of Sweden. Nokia and Siemens aim to make the venture a more standalone business after they abandoned talks with private-equity companies in July 2011 as the buyout firms failed to come up with a compelling offer. The parents said two months later Nokia Siemens would ‘‘become a more independent entity.’’

To contact the reporters on this story: Adam Ewing in Stockholm at aewing5@bloomberg.net; Richard Weiss in Frankfurt at rweiss5@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net


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Companies Mentioned

  • CIEN
    (Ciena Corp)
    • $20.69 USD
    • 0.22
    • 1.06%
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