Nokia Siemens buys Motorola networks division for US$1.2bn

19 Jul 2010

Nokia Siemens Networks has entered into an agreement to acquire the majority of Motorola’s wireless network infrastructure business for US$1.2bn in cash.

The companies expect to complete closing activities by the end of 2010, subject to customary closing conditions, including regulatory approvals.  

“This is an exciting acquisition that I believe has significant benefits for customers, employees and our shareholders,” said Rajeev Suri, chief executive officer of Nokia Siemens Networks.

“Motorola’s current customers will continue to get world-class support for their installed base and a clear path for transitioning to next-generation technologies while employees will join an industry leader with global scale and reach. Nokia Siemens Networks will see the benefits of a deal that is expected to enhance profitability and cash flow and to have significant upside potential.”

What may lie ahead for Nokia Siemens Networks

As part of the transaction, Nokia Siemens Networks expects to gain incumbent relationships with more than 50 operators and to strengthen its position with China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone.

For Motorola, the move will mean it will be freed up financially and operationally to focus its energies on turning its mobile device business around. The company recently unveiled its latest DROID smartphone and needs to be battle fit in a new world order of device manufacturers where Android phones are shipping at a rate of 160,000 a day, Apple is rapidly becoming a leader and HP has bought Palm with a view to being a mobile device giant.

It is understood that Motorola will retain certain wireless division assets, including its “push to talk” technology known as “iDEN.”

“Motorola is very proud of the operational and financial performance of our Networks business and its employees, who will now become a valuable addition to Nokia Siemens Networks. We are excited to have reached this agreement to combine our Networks team with such an industry leader,” said Greg Brown, Co-CEO of Motorola.

“This is great news for our customers, our investors and our people and will allow us to sharpen our strategic focus on providing mission and business critical solutions for our government, public safety and enterprise customers.”

Nokia Siemens Networks battles competition

The news has been welcomed by telecoms analyst Julian Bright of Informa Telecoms & Media who says the deal makes sense for Nokia Siemens Networks (NSN), which has had to become more aggressive in the face of competition from the likes of Huawei and Ericsson.

“NSN lost out to Ericsson when Nortel’s wireless infrastructure assets were sold off in 2009, and Motorola’s access layer technology, particularly on CDMA and evolution toward LTE, will complement NSN’s strengths in core networks and services. NSN will also get access to Motorola’s WiMAX customers who may want to upgrade to LTE. The deal will also help to shore up NSN’s position in North America and markets in Asia, such as Japan and China.

“However, Nokia Siemens Networks has set itself a huge challenge with this acquisition. NSN struggled with the original merger of the two companies and the integration with Motorola will probably add to its woes. The new entity represents a tough mix of nationalities, with the combination of US, German and Finnish cultures.

“While there are opportunities for the merger to enable the creation of more integrated solutions such as Single RAN, NSN first needs to overcome the problems associated with integrating a new vendor’s RAN equipment with its own existing core network, backhaul, network and subscriber management products.”

“Meanwhile, the deal also signals the end of the North American wireless infrastructure business and could accelerate the break up of Motorola, with buyers circling for the handset and enterprise businesses. Motorola and Nortel were mobile pioneers but faded away partly due to their focus on CDMA rather than GSM, WCDMA and LTE.

“However, it’s important to note that wireless infrastructure operations continue in the region, just with headquarters based in Europe rather than North America,” Bright said.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years