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Telecommunications Nokia & Siemens to merge comms infrastructure businesses
Telecommunications Nokia & Siemens to merge comms infrastructure businesses | Nokia & Siemens to merge comms infrastructure businesses |
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| by Stuart Corner | |
| Tuesday, 20 June 2006 | |
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It will comprise Nokia's Networks Business Group and those parts of Siemens Communications producing network infrastructure and other carrier products and services for fixed and mobile networks. The two companies claim the JV will have a leading position the market for equipment and services to address fixed-mobile convergence. It will have around 60,000 employees. Simon Beresford-Wylie, currently executive vice president and general manager of networks for Nokia will be its CEO and Peter Schönhofer, a member of the executive board of Siemens AG Austria its CFO. According to Nokia and Siemens, on current market share data, the JV will be the second largest company in mobile infrastructure, second in services, third in fixed infrastructure, and the third largest in the overall telecommunications infrastructure market. "The company's portfolio will include next generation network convergence products like IMS, 2G GSM/EDGE access, 3G WCDMA/HSDPA access, extensive mobile core, fixed broadband, transport, IPTV, LTE, WiMAX and low-cost mobile voice products tailored for emerging market operators." Nokia and Siemens estimate cost synergies of EUR 1.5 billion ($A2.6b) annually by 2010, primarily from the elimination of overlapping functions, consolidation and better utilisation of sales and marketing organisations, reduction of overhead costs, sourcing benefits, and greater efficiencies in R&D. They expect to achieve a substantial portion of these synergies in the first two years. As a result of the merger the combined workforce of 60,000 is expected to be reduced by 10-15 percent over the next four years (a reduction euphemistically referred to as "an adjustment" in the press release). The JV will have its operational headquarters in Helsinki and "strong regional headquarters" in Munich where three of the future five divisions of the new company will be based. Closing is expected before the end of 2006. After closing, the financial results of Nokia Siemens Networks will be consolidated by Nokia and accounted for at equity by Siemens. The companies claim the deal was put together in just three weeks. However when questioned more closely on the history of the deal declined to elaborate. Rumours of a merger or sale of parts of Siemens Communications have been circulating for months as the business has shed staff in the wake of worsening financials. In May Siemens Com announced plans to shed 1000 staff, after cutting its head count by 1500 in the preceding eight months. These rumours intensified greatly after announcement of the Lucent Alcatel merger which was tipped to trigger a fresh way of consolidation among major global players. Back in April both Nortel and Motorola were named as potential partners for Siemens Comm and the deal with Nokia leaves both these in weaker positions, suggesting that further consolidation is inevitable. Another driver for consolidation is increasing pressure from major Asian manufacturers, particularly Huawei Technologies. Nortel has been negotiating a JV with Huawei for months, but last week announced that it would not go ahead. In April Siemens was reported to be in talks with Motorola over a possible sale of Siemens Com. The same month Prudential Equity Group analyst Inder Singh put out a memo suggesting that a combination of Nortel and Siemens Comm would be a good idea. "We believe a joint Siemens/NT would hold lead shares in several key markets, including enterprise telephony (two percent worldwide market share), next-gen switching (36 percent), wireless infrastructure (22 percent) and optical (19 percent). Even with the presence of a combined Lucent/Alcatel, we believe the Siemens/Nortel combo would hold the number one or number two share in each of these markets." At a press conference announcing the deal, Siemens said it was "actively pursue the consolidation in the enterprise networks industry'' and that it was "in negotiations with several interested parties to execute this strategy". Siemens Com has already moved to strengthen its position in the enterprise market. In October 2005 it announced an alliance with 3Com Corporation combining their respective enterprise technologies. Siemens said it would sell a range of enterprise data networking and security products and complementary services based on 3Com switches and routers and Siemens' identity and access management solutions and 3Com's TippingPoint Intrusion Prevention System (IPS). The two companies also said they would collaborate to develop joint capabilities to enhance their combined enterprise applications and platforms. Siemens was appointed a 3Com Strategic Alliance Partner and Master Reseller with active participation in strategic product development initiatives at 3Com.
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