Siemens/Motorola: Swap or Sale?

Dear old pals, jolly old pals. Siemens AG (NYSE: SI; Frankfurt: SIE) and Motorola Inc. (NYSE: MOT) are staring into each others' eyes and, allegedly, discussing how they could help each other out in today's wireless world. It's a conversation they've had once before, during that hazy, lazy summer of '01.

This time, though, the expectation of some hard and fast action seems a tad more concrete. The talk in the past day or so has focused on Siemens handing over its handsets business in return for Motorola's wireless networks unit. This would allow each company to focus on what they, and others, feel are now their core strengths.

For Motorola, such a swap would bolster its share of the handset market to somewhere in the region of 26 percent, a clear second behind Nokia Corp. (NYSE: NOK) (see Nokia Extends Handset Share). Meanwhile, the German vendor would be able to supplement its GSM mobile infrastructure business with the number-three position in the CDMA equipment market, which Siemens has so far shunned. Such a holding could come in very handy in China, for example.

Naturally, both companies are sticking to the "no comment on rumor and speculation" line.

However, not everyone is in agreement about the kind of deal the two vendors may be discussing. Analysts at Lehman Brothers believe a straight sale by Motorola of its infrastructure business, excluding the iDEN division that supplies Nextel Communications Inc. (Nasdaq: NXTL), could be in the cards. In a research note, the analysts say not only that Motorola is strong in CDMA -- with customers such as Sprint PCS (NYSE: PCS), Verizon Wireless, and Japan's KDDI Corp. -- but also that "Motorola's portfolio of GSM customers, particularly China Mobile Communications Corp., may help Siemens gain further economies to scale in the GSM infrastructure business, where they are currently the third player behind Ericsson AB (Nasdaq: ERICY) and Nokia."

The team at Lehman believes that this would be a smart move for Motorola, as the networks business about breaks even at present, and that the new top management team will be driving towards a sale. Lehman estimates the revenues from Motorola's infrastructure unit to be about $4.5 billion in 2002, falling to $4.2 billion next year.

As for the idea of a business unit trade, the analysts "are more skeptical regarding the merits of asset swaps in the handset area."

Consolidation has been talked about for a while in both the operator and vendor sectors. This could be the start of something quite big for the infrastructure guys.

— Ray Le Maistre, European Editor, Unstrung
WirelessUndertaker 12/4/2012 | 9:36:26 PM
re: Siemens/Motorola: Swap or Sale?
It is not surprising that Siemens is interested in Motorola's CDMA business. While the UMTS market has come to a screeching halt at least for the next year or two, and the GSM expansion contracts have been reduced a trickle, there is still money to be made in CDMA in the short term. Even a smaller GSM-only infrastructure vendor such as Interwave Communications has resorted to buying a CDMA company to keep them afloat and weather this telecom recession.
Guglielmo 12/4/2012 | 9:35:34 PM
re: Siemens/Motorola: Swap or Sale? Rumor: They could not reach a strike price on the amount of cash it would take to balance the swap. Don't know if they will announce break off, since they never formally announced talks.

First Nortel, now Siemens, leave Motorola at the altar. What's wrong with this bride?
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