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Nokia Denies Network Sell-Off

Nokia Corp. is denying rumours that it is considering the sale of its network division, blaming inaccurate media reports as the cause of such speculation.

Earlier this week, Irish website RTE News cited an interview with French newspaper Les Echos in which CEO Jorma Ollila reportedly commented that the telecommunications infrastructure sector has excessive capacity and the Finnish company will therefore not rule out a complete withdrawal.

Nokia’s communications director Thomas Jönsson claims the RTE article is “wholly inaccurate,” and that Ollila’s original comments are in complete contrast to RTE’s version of events. “I can’t stress that enough,” he tells Unstrung. "Mr Ollila said in the interview with Les Echos that he would not sell the mobile infrastructure business."

Jönsson says the French version has Ollila stating that “infrastructure is really a part of the Nokia DNA. Giving it away would be like giving half of our heart away, even if someone is offering a very good price."

RTE has since removed the article in question from its website. “It was easier to take it down than confirm the facts,” says a spokesperson.

Either way, such speculation is hardly surprising in light of Nokia's recent troubles. The company’s network division continues to strangle company growth, with a €399 million (US$446 million) restructuring charge suffocating profits in its second quarter results (see Nokia Charge Nips Profits). The downturn in the wireless infrastructure market has hit Nokia harder than any of its closest rivals, forcing the vendor to slash staff numbers by over 2,300 in this year alone (see More Finns Finished).

A series of high-profile problems with its 3G CDMA wireless kit have also added to its woes, and are likely to put off any potential acquirers (see Nokia Suffers 3G Blow and Hutch's Nokia Network Woes?).

“The question is, who would buy it?” asks Nomura Holdings Inc.'s Dr Richard Windsor. “I can’t think of anyone, seeing as it is having such problems with its 3G solution at the moment. If the company can fix its problems and have a workable 3G solution, then it has an excellent embedded customer base on offer.”

Windsor believes there is no real motive for Nokia to continue nursing its ailing networks group. “There is no strategic reason why Nokia should want to have an infrastructure division. The days when it was necessary to have an infrastructure section are gone, because the industry is now much more horizontal. It just isn’t a core aspect of the Nokia business at present. It is never going to make as much money as its handset division.”

Recent upbeat forecasts from the vendor at least provide a glimmer of hope for a future turnaround. In a mid-quarter update last month, Nokia stated that the market appears to be stabilizing. As a result, third-quarter sales at Nokia Networks are estimated to decline by 15 to 20 percent year-on-year, in line with previous guidance, while pro forma operating profit is now expected to be close to breakeven (see Nokia Raises Q3 Guidance).

Such forecasts convince Gartner Inc.'s principal analyst for mobile communications, Jason Chapman, that the Finnish giant will ride out the bad times. “I can’t see it selling -- no way. All the forecasts are for the industry improving, so it just wouldn’t make sense.”

Nokia is due to announce its Q3 results Thursday, October 16.

— Justin Springham, Senior Editor, Europe, Unstrung
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