Light Reading
Nokia Siemens Networks is offloading its optical division, including its 100G assets, to the private equity firm that bought Sycamore

NSN to Sell Optical Business

Ray Le Maistre
12/3/2012
50%
50%

Nokia Networks has agreed to sell its Optical Networks business to Marlin Equity Partners, the private equity firm that recently announced plans to buy what was left of Sycamore Networks Inc. (Nasdaq: SCMR). (See Sycamore Prepares to Shut Down.)

No financial terms were disclosed. Once the deal is concluded, which is expected to happen in early 2013, about 1,900 NSN staff, most of whom are based in China, Germany and Portugal, will transfer to Marlin. The private equity firm is creating a new optical systems company, based in Munich, with NSN's current head of optical, Herbert Merz, as the CEO.

The divestment includes NSN's 100Gbit/s coherent platform, the hiT 7300, and its packet-optical switch, the hiT 7100, plus a number of network management and planning tools. NSN claims to have more than 200 optical transport systems customers. (See XO Deploys First Nationwide 100G Network, XO's Not Done Yet With 100G, NSN Makes Optical Advances and Euronews: NSN Lands 100G Deal.)

The deal does not include NSN's Carrier Ethernet assets, for which a separate divestment deal is being sought. (See Can NSN Offload Its Carrier Ethernet Assets?)

NSN has already sold a number of technology assets, including its microwave backhaul, WiMax, fixed access broadband and IPTV product lines, and is still seeking buyers for others parts of the business. (See Is NSN Close to BSS Sale? and M&A Interest in NSN's BSS Assets Builds.)

Marlin intends to form a new optical equipment company around the new acquisition and buy more assets: It says it "intends to act as a consolidator, building an industry leader in the fragmented optical networking sector."

That sector, which generates sales of around US$15 billion a year currently, has been in decline this year, according to Ovum Ltd. . The current market leaders, according to Infonetics Research Inc. , are Huawei Technologies Co. Ltd. , Ciena Corp. (NYSE: CIEN) and Alcatel-Lucent (NYSE: ALU). (See Ovum: Optical Networking Market Shrinks Again.)

Why this matters
This is a significant move for NSN, which had not identified its optical business as "non-core" when it unveiled its new strategy a year ago. In fact, NSN pinned its future on a broad mobile broadband-focused market strategy, dubbed Liquid Net, that included Liquid Transport as a key element. (See NSN Hangs Its Future on the Liquid Net.)

But NSN is still a company struggling for financial stability and this deal should bring in some cash and, perhaps more importantly, reduce its operating cost base beyond its initial targets, as the 1,900 staff that will come off its payroll are in addition to the 17,000 jobs NSN is shedding as part of its restructuring process.

That cost-cutting process is already having an impact on NSN's profitability, so the vendor's parents, Nokia Corp. (NYSE: NOK) and Siemens AG (NYSE: SI; Frankfurt: SIE), will likely see this asset sale as a positive. (See APAC Boosts NSN's Q3.)

An NSN spokesman tells Light Reading that "transport is important" but that the company could now narrow its technology focus on the radio access network (RAN), mobile core and customer experience management (CEM). Once the divestment is complete, NSN will "work with best-of-breed partners" and integrate third-party technology with its remaining mobile broadband products using its Service Provider Information Technology (SPIT) tools (NetAct and configuration software) in the same way it already does with routers and microwave backhaul systems.

For the optical transport sector, this deal signals something of a shake-up, as Marlin clearly intends to look for further assets to buy to give it greater scale. The private equity firm is also intent on building a broader portfolio for the telecom sector as it recently acquired Openwave Messaging Inc. and Openwave Mobility Inc. (See Openwave Goes Private and Unwired Planet Sells Units to Marlin.)

For more on NSN's transformation



— Ray Le Maistre, International Managing Editor, Light Reading

(10)  | 
Comment  | 
Print  | 
Newest First  |  Oldest First  |  Threaded View
digits
50%
50%
digits,
User Rank: Light Beer
12/5/2012 | 5:16:44 PM
re: NSN to Sell Optical Business


Marlin Equity must have a cunning plan up its sleeve.... or maybe it doesn't mind the thin margins that optical attracts these days.


Depending on what sort of cash NSN is getting -- remember, it gave Adtran money to take the fixed broadband business off it shands -- this looks like quite a smatr move, allowing it to be even more focused and reducing its opex further.


By the end of 2013 this should be helping NSN's margins.

Brunonero
50%
50%
Brunonero,
User Rank: Light Beer
12/5/2012 | 5:16:43 PM
re: NSN to Sell Optical Business


...and NSN's gross margins were already the industry's highest in Q3.  


In order of next best performers in Q3, gross margin and operating margin/profit:


NSN        GM=32.2%  OP=9.2%;


Ericsson  GM=30.4%  OP=6.7%;


Alu         GM=27.9%  OP=-5%  (negative OP);


ZTE        GM=17%     OP=-16% (negative OP).

paolo.franzoi
50%
50%
paolo.franzoi,
User Rank: Light Beer
12/5/2012 | 5:16:43 PM
re: NSN to Sell Optical Business


Bruno,


Left Cisco off that list...


seven


 

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:42 PM
re: NSN to Sell Optical Business


NSN + E/// = 1 company? In 2013?


Taking bets now..... 3:1 odds.

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:16:41 PM
re: NSN to Sell Optical Business


Tom Nolle of CIMI Corp. says NSN now must acquire cloud-services technology. 


The company has forced its own hand, he says: "The question is whether it realizes that once you leave the transport layer you have nowhere to go except the service layer."


http://blog.cimicorp.com/?p=1026


His broader thesis is that equipment vendors are headed into the same space as the likes of Amazon, Apple and Google.


Thoughts?

Pete Baldwin
50%
50%
Pete Baldwin,
User Rank: Light Beer
12/5/2012 | 5:16:41 PM
re: NSN to Sell Optical Business


You mean a deal completed in 2013, or a deal simply announced in 2013?  Could be a big difference...

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:40 PM
re: NSN to Sell Optical Business


I agree with some of Tom's points.


But..... can you really see NSN doing any acquisition? Or is it more likely that they will get acquired?


P.S. Would you like the odds on NSN doing any acquisition in 2013? :)

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:40 PM
re: NSN to Sell Optical Business


Announced. I think people will want waaayyyyyyyy greater odds for 'completed' :)

macster
50%
50%
macster,
User Rank: Light Bulb
12/5/2012 | 5:16:39 PM
re: NSN to Sell Optical Business


On a more serious note:


From Tom's blog, operator revenue is not merely 'capped'. I see it decreasing in the coming years. There's only so much you can do to reduce network cost (though other aspects of 'costs' like customer acquisition costs, e.g. subsidies have yet to be really looked at). You need new avenues of top-line growth, as Tom alluded (OTT).


I remain skeptical. In another article, Ray commented and asked if Virgin's WiFi networks would help operators with the mobile data issue. In the UK (and Europe), people tend to be indoors and play with their smartphones, consuming bandwidth indoors (on WiFi). Does this not actually shift revenue away from mobile? I've not heard a compelling plan from any operator, on how they intend to grow revenue.

amitawal
50%
50%
amitawal,
User Rank: Light Beer
12/5/2012 | 5:16:38 PM
re: NSN to Sell Optical Business


Would be good to see someone workout the math, compare Nortel's sell price and guess NSNs !!

Educational Resources
sponsor supplied content
Educational Resources Archive
Flash Poll
From The Founder
It's clear to me that the communications industry is divided into two types of people, and only one is living in the real world.
LRTV Custom TV
Razorsight Expert's Advice on Real-Time Analytics

11|27|14   |   1:43   |   (0) comments


Razorsight's powerful cloud-based Predictive Analytics solutions are used by the world's leading communications and media brands to drive smarter decisions, enable faster actions and optimize outcomes. Get expert advice.
LRTV Interviews
From 4G to 5G: Alcatel-Lucent's Dave Geary

11|25|14   |   09:09   |   (1) comment


Dave Geary, President of Wireless at Alcatel-Lucent, talks about the evolution of the 4G market, small cells, partnerships, 5G and the IoT.
LRTV Huawei Video Resource Center
Building a Secure Telefonica Network With Huawei's High-End Firewall

11|24|14   |   4:37   |   (0) comments


Andrew Davies, IP architect of the Telefonica, a leading digital communications company, discusses the Huawei security gateway solution and putting the solution into the testbed.
LRTV Huawei Video Resource Center
Huawei Partners with Spirent to Verify CE12816's 10GE Port & TRILL Networking Capabilities

11|24|14   |   2:50   |   (0) comments


Spirent Communications is the world's leading supplier for telecom testing appliances and solutions. Spirent has been in a close partnership with Huawei for a long time.
LRTV Huawei Video Resource Center
Saudi Airlines & Its ICT Transformation

11|24|14   |   2:07   |   (0) comments


In this video, Saudi Airlines discusses its network problems and how Huawei's Agile Network is its all-in-one solution.
LRTV Huawei Video Resource Center
Huawei's Agile Switch Benefiting Saudi Arabia's Yamamah Hospital

11|24|14   |   2:40   |   (0) comments


Saudi Arabia's Yamamah Hospital speaks about how Huawei's Agile Switch has improved the medical service's network infrastructure.
LRTV Huawei Video Resource Center
FanPlay & Huawei Build a Wireless Agile Smart Stadium

11|24|14   |   2:13   |   (0) comments


FanPlay is a cloud-based white label service, which is effectively a football fan engagement platform underpinned by mobile payment technology.
LRTV Huawei Video Resource Center
Building an Agile Stadium

11|24|14   |   3:54   |   (0) comments


Stadiums may be thousands of tons of concrete and steel, but they now need to be agile. Being at the stadium may not be as alluring as it once was. Sports franchises and stadium operators discuss how to get fans back.
LRTV Huawei Video Resource Center
Huawei Helps ChinaCache Tackle Challenges in the Internet Industry

11|24|14   |   3:09   |   (0) comments


ChinaCache is China's largest content distribution network supplier. Huawei's CE12800 has provided ChinaCache with very strong support in its establishment of an infrastructure network.
LRTV Huawei Video Resource Center
Cefinity on Managed Security Services & Next-Generation Firewall

11|24|14   |   7:05   |   (0) comments


Cefinity is a cloud management service provider in Southeast Asia. Ivan Zhang, CEO of the company, discusses the implementation of security service management in the cloud era.
LRTV Huawei Video Resource Center
Huawei's Agile Gateway in the Eyes of Cefinity

11|24|14   |   2:11   |   (0) comments


Cefinity is a managed service provider for enterprise networks. The company currently uses Huawei's AR series routers for the most complete range of functions. CEO Ivan Zhang speaks about the advantages of the AR series routers.
LRTV Huawei Video Resource Center
CTO of Bus-Online Talks About Huawei's Agile Gateway

11|24|14   |   2:53   |   (0) comments


Bus-Online covers around 100 million users everyday. In addition to providing mobile TV, and advertising services to the public, Bus-Online has also entered the field of mobile Internet.
Upcoming Live Events
December 2, 2014, New York City
December 3, 2014, New York City
December 8-10, 2014, Reykjavik, Iceland
February 10, 2015, Atlanta, GA
April 14, 2015, New York City, NY
May 6, 2015, McCormick Convention Center, Chicago, IL
May 13-14, 2015, The Westin Peachtree, Atlanta, GA
June 9-10, 2015, Chicago, IL
Infographics
Irish Telecom outlines the rise of VoIP technology, including its adoption within businesses and their perception of its quality.
Hot Topics
Net Neutrality Even Mark Cuban Could Love
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/26/2014
Eurobites: Net Neutrality Battle Looms
Paul Rainford, Assistant Editor, Europe, 11/27/2014
Why 5G Is a Different Beast
Robert Clark, 11/26/2014
New Juniper CEO Can Be Thankful for $14.5M
Mitch Wagner, West Coast Bureau Chief, Light Reading, 11/25/2014
Amazon Eyes Ad-Supported Video – NY Post
Mari Silbey, Independent Technology Editor, 11/25/2014
Like Us on Facebook
Twitter Feed