Light Reading

Nokia Siemens JV in Jeopardy

Light Reading
News Analysis
Light Reading
12/14/2006
50%
50%

A corruption scandal that includes charges of money-laundering via Greece and Lichtenstein has thrown a spanner into the works of the merger that would create the world's second-largest vendor of wireless infrastructure.

In a terse, 219-word statement, Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE), whose combined networks divisions were forecast to generate $23.15 billion in revenue in 2007, said they would delay the launch of the joint venture until the first quarter of 2007 rather than starting with the new year. (See Nokia, Siemens Create Networks Giant.)

"In light of the current investigations of Siemens, the scope of which includes the carrier-related business to be transferred to the new company, Nokia and Siemens intend to adjust their agreements in order to have Siemens conduct an appropriate compliance review prior to closing of the transaction," the two companies said.

The statement also said the merger "will be subject to an agreement between Nokia and Siemens on the results and consequences of a Siemens compliance review."

The announcement followed a meeting of the Siemens supervisory board on Monday to discuss the affair, which has already resulted in the arrest of a former top manager of the company's telecoms equipment division. German newspaper Frankfurter Allgemeine Sonntagszeitung ran a story over the weekend quoting an anonymous Siemens manager, who said the company fears that Nokia might pull out of the joint venture entirely depending on how far the scandal reaches.

Authorities have raided Siemens offices including that of CEO Klaus Kleinfeld, charging that the company has engaged in kick-backs and bribes for European network contracts, and has funneled money through private accounts in Switzerland, Greece, and Lichtenstein.

The market uncertainty surrounding the now wobbly JV will the hurt the combined companies even more than the direct financial losses from delaying for a few months, says Carmi Levy, senior research analyst at Info-Tech Research Group.

"On the surface, it delays the start of a combined revenue stream and the realization of the projected economies of scale that justified the deal in the first place," Levy comments in an email. "More deeply, it puts potential clients on hold as they wait for the Siemens investigation to play out."

"This is a timetable change only," asserts Nokia spokeswoman Laurie Armstrong. "The intent to form Nokia Siemens Networks and the business logic of the transaction remains unchanged and we will continue the integration process as planned."

That, however, could change. Asked if the growing scandal is enough to scuttle the merger, Gartner Inc. research vice president Phillip Redman replied, "Absolutely" in an email.

"This is enough for Nokia to walk away now without penalty, especially if financials are at stake and misstated," Redman adds. "This could take a long time to sort out and Nokia may not have the patience."

Abandoning the combination now would leave a gaping hole in the strategies of both Nokia, the world's No. 1 maker of cell phones, and Siemens, whose stock has shot up nearly 20 percent since the deal was announced in June. An October report from Unstrung Insider, titled "Vendor M&A Frenzy: What Happens Next," noted that major deals including most of the largest wireless infrastructure providers have created a "de facto oligarchy" of suppliers that will account for more than 80 percent of worldwide cellular infrastructure revenues in coming years.

"Size directly influences a vendor's ability to invest in R&D, optimize the supply chain and manufacturing, provide financing, achieve geographic diversity, and, ultimately, make a profit," wrote analyst Gabriel Brown, the author of the report.

The worldwide wireless infrastructure market is expected to hit $56 billion in 2006. Ericsson AB (Nasdaq: ERIC), the world's No. 1 vendor, controls around 26 percent of that. The combined Nokia Siemens Networks would have about 20 percent, according to analysts' estimates.

— Richard Martin, Senior Editor, Unstrung

(0)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View        ADD A COMMENT
Flash Poll
From The Founder
Network architects aiming to upgrade their networks to support agile, open, virtualized services in the 21st century need to consider new criteria when choosing between technology suppliers.
Live Streaming Video
BTE 2015 Sponsor Keynote: HP
Dr. Prodip Sen, CTO, Network Functions Virtualization, HP
LRTV Documentaries
IoT in Action

6|30|15   |   1:39   |   (5) comments


Two co-workers discuss the benefits of IoT technology.
LRTV Interviews
Ericsson Opens Up on OPNFV

6|30|15   |   14:16   |   (0) comments


Martin Bäckström, VP and head of industry area Datacom at Ericsson, talks to Light Reading founder and CEO Steve Saunders about the emergence of OPNFV, the importance of standards and Ericsson's OPNFV plans.
LRTV Custom TV
NetNumber Founder Discusses NFV/SDN Impact on SP Networks

6|26|15   |   4:15   |   (0) comments


NetNumber Founder Doug Ranalli examines why SPs need a new network infrastructure for service agility. While NFV and SDN are the tools, the old ways of thinking about signaling control are inhibitors. Doug provides his recommendations.
LRTV Custom TV
Orchestrating NFV vCPE Services Across Multivendor Networks

6|26|15   |   5:46   |   (0) comments


Nirav Modi provides an overview of vCPE, the fastest-growing NFV use case, showing how Cyan's Blue Planet orchestrates vCPE services across a multivendor infrastructure to rapidly deliver new managed services for business customers.
LRTV Custom TV
ZTE at LTE Summit Amsterdam 2015

6|26|15   |     |   (0) comments


As one of the leading global telecommunications providers, ZTE presented its cutting-edge technology at LTE World Summit 2015 in Amsterdam. On display at ZTE's booth were the latest R&D achievements in wireless, 5G development, HetNet, deep convergence of FDD and TDD, and RCS/IMD/iSDN/vCN.
LRTV Documentaries
OPNFV Director Opens Up on Women in Tech

6|25|15   |   3:25   |   (0) comments


Heather Kirksey, the director of the OPNFV, gets real about the gender disparity in open source and standards and discusses how we can change both the conversation and the gender dynamics.
LRTV Custom TV
Symantec's Service Provider Security Strategy

6|24|15   |   7:06   |   (0) comments


Didi Dayton explores Symantec's emerging enterprise security strategies for service providers. Highlights include 'killing the password,' self-defense, advanced analytics and adaptive response in a service provider architecture.
Between the CEOs
Debating Network Evolution With Cisco's Cedrik Neike

6|23|15   |   12:54   |   (2) comments


Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
LRTV Documentaries
Vodafone: What's Good for Moms Is Good for Business

6|23|15   |   3:04   |   (3) comments


Megan Doberneck, the general counsel for Vodafone Americas, discusses her company's progressive maternity policy, explains why promoting women in tech is good business and offers some some good advice for any women in the industry.
LRTV Interviews
NFV: Ready for Prime Time

6|23|15   |   05:09   |   (1) comment


At BTE 2015, Vip mobile CTO Dejan Kastelic talks about how NFV is ready for the real world and how Telekom Austria is introducing centralized resources for its group operations.
LRTV Documentaries
Tykes Talk Tech

6|22|15   |   02:30   |   (9) comments


What does optical fiber look like? When will 5G arrive? What's the WiFi password at Ikea? Light Reading sat down with three 8-year-olds to answer some of the communications industry's most burning questions...
LRTV Huawei Video Resource Center
Huawei Partners With TDC for World's First Early DOCSIS 3.1 Field Test

6|22|15   |   3:06   |   (0) comments


In a move to enhance user experience, Denmark's TDC aims to become an early adopter of DOCSIS 3.1. In partnership with Huawei, TDC recently ran the world's first field tests on its coax network that reached speeds nearing 1 Gbit/s.
Upcoming Live Events
September 16-17, 2015, The Westin Galleria Dallas, Dallas, TX
September 29-30, 2015, The Westin Grand Müchen, Munich, Germany
October 6, 2015, The Westin Peachtree Plaza, Atlanta, GA
October 6, 2015, Westin Peachtree Plaza, Atlanta, GA
October 14-15, 2015, New Orleans Ernest N. Morial Convention Center, New Orleans, LA
All Upcoming Live Events
Infographics
Hot Topics
Staying Productive With My Office-in-a-Bag
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/25/2015
Who's Feeding Fiber to LinkNYC Hotspots?
Mari Silbey, Senior Editor, Cable/Video, 6/29/2015
Eurobites: Activist Investor Takes Stake in AlcaLu
Paul Rainford, Assistant Editor, Europe, 6/30/2015
What's in Your Office-in-a-Bag?
Mitch Wagner, West Coast Bureau Chief, Light Reading, 6/26/2015
Like Us on Facebook
Twitter Feed
Webinar Archive
BETWEEN THE CEOs - Executive Interviews
Casa Systems has been going from strength to strength over the last couple of years. In 2013, it became the first vendor to ship an integrated CCAP device -- the ...
Cedrik Neike, SVP of Global Service Provider, Service Delivery, at Cisco, talks to Light Reading founder and CEO Steve Saunders about solving service provider customer problems in a virtualized, DevOps world, including multivendor support and the future of network procurement.
Cats with Phones