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Optical/IP

NSN Creates Spinoff Investment Fund

Nokia Networks has created an investment vehicle called Verso Ventures that will invest in independent companies formed from the vendor's non-core activities that it's trying to offload.

When it unveiled its restructuring process in November 2011, NSN announced a number of technology sectors that are no longer core to its strategy (including fixed VoIP, carrier Ethernet, IPTV and unified charging and billing), with some already the subject of divestment deals. (See below for more details.)

But it's likely that some non-core assets will not attract buyers and subsequently be closed down. So NSN wants to give those product lines an alternative lifeline by giving them the chance to break away as independent businesses, fuelled with some startup cash from Verso's Spin-off Fund. NSN says it will also license its technology to these startups.

However, NSN is only putting up to €10 million (US$12.3 million) into the fund and is therefore relying on external investors to inject additional capital to help fund the startups. So far there are no investment partners, though Finnvera , a state-owned Finnish investment firm that advised NSN on the creation of Verso, is a "potential" investor.

External funds look essential: NSN says it has already received about 40 applications for funding. Those are now being evaluated, with between 10 and 30 spin-offs to be created in the first phase, the vendor says. A spokeswoman gave smart-grid technology as an example of one area that was under consideration.

Why this matters
Without this scheme there's a chance that technology and business developments will be shut down, so this fund at least means there is a greater chance that people will continue to have a job, get the chance to further develop their existing plans (currently in limbo) and become entrepreneurs.

But while times are hard at NSN, €10 million, potentially split between up to 30 spin-offs (which may then be asked to pay licensing fees back to NSN), really doesn't sound like much of a commitment.

For more


— Ray Le Maistre, International Managing Editor, Light Reading

Soupafly 12/5/2012 | 5:31:23 PM
re: NSN Creates Spinoff Investment Fund

Am not sure I would use the word "commitment" in a sentence that includes VC cash, fund, start-ups and $10m.


I guess apart from access to a tarnished brand (NSN are sinking as ALU*) and network smarts, what exactly is it that Nokia Siemens thinks it brings to the start-up table?


* Sinking is used because, both NSN & ALU are holed beneath the waterline and will never recover.


The mergers were strategic blunders of the highest order and distracted them. As a result significant energy went into internal power-games, politics and squabbles, whilst there lunch was been eaten by a new breed of low cost competitor.


ALL their tech has been copied and they have no strategic tech or advantage + a higher cost base. So its over from a competitive business point of view.


 

digits 12/5/2012 | 5:31:23 PM
re: NSN Creates Spinoff Investment Fund

I think this is a great idea but I wonder what message it sends out that NSN is only putting up to €10 million into the fund, which could then be shared by up to 30 spin-offs...


Times are hard at NSN but I can't help thinking that more cash could have put towards this, especially as these will be investments that could deliver returns!


For the spin-offs' sakes I hope some other investors join in - but maybe other potential investors might be put off by NSN's low strating point?


I have no experience in this area but...

rhr 12/5/2012 | 5:31:17 PM
re: NSN Creates Spinoff Investment Fund This is an interesting development but Gé¼10M is pretty modest and will fund one or two early stage startups. But given how VCs have fled the sector and especially optical and semis, this is welcome nonetheless.

Also NSN invested with Ericsson in silicon photonics startup Skorpios Technologies less than a year ago and is working with them on WDM-PON.

And is-áALU really holed? If it is, it is doing a great job bailing out the water with Bell Labs-inspired core router ASICs, lightRadio and 100G+ coherent systems.
Soupafly 12/5/2012 | 5:31:16 PM
re: NSN Creates Spinoff Investment Fund

@ rhr; Fair comment and rebuttal to my "holed below the waterline" reference.


Its a view and based on completely subjective opinions.


I don't believe the Core router announcements, lightradio or 100G activities will save them over the medium to longer term. Others will fast follow & copy the core components of those offerings - asap. Huawei, ZTE, Cisco, Ericsson all will be looking at what they are working on and benchmarking there R&D efforts & business impact against ALU's announcements, roadmap & pipeline.


VC typically take a 1 in 10 position on there portfolio investments, and look for that 10% hit to more than compensate for the 90% misses/losses. That's why I stated that using words like commitment, VC, etc is an oxymoron in this case. Its just not credible. Its a pure PR move.


Even if they were able to improve by 100% that strike rate, it would still only give them a 20% hit rate & with a $10m fund to start with, its just not going to happen.


 


 

Bannana 12/5/2012 | 5:31:09 PM
re: NSN Creates Spinoff Investment Fund

Soupafly - I disagree that this is a pure PR move. More likely, some of NSN management is shocked by the ongoing carnage and is trying to preserve some of the good projects that are being slaughtered.


In principle, creating start-ups to work on these ideas without the restrictions of NSN's business processes would be the way to do it, alas, with $10million split between 30 of them, they are not likely to succeed. Too bad.

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