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NSN & Moto: It's All in the Execution

Now that NSN has made its $1.2B move on Motorola's wireless infrastructure business, analysts say NSN's execution of the deal will be key to its success

Michelle Donegan

July 20, 2010

4 Min Read
NSN & Moto: It's All in the Execution

Nokia Networks is set to capture new customers and expand substantially in North America if it seals the deal to acquire Motorola Inc. (NYSE: MOT)'s wireless infrastructure business for $1.2 billion, but how the vendor executes on this transaction will be vital to its success, according to analysts. (See NSN Expands in North America With Moto Buyout, Moto Hangs On to $400M iDEN Biz, and NSN to Buy Moto's Wireless Biz for $1.2B .)

It's been no secret that NSN has wanted to increase its footprint in North America, in particular, and NSN CEO Rajeev Suri said so today during the media briefing about the acquisition. This deal would do just that, as well as give NSN more presence in the Asia/Pacific region, especially in Japan and China, claims NSN. (See Reader Poll: NSN's Best US Fit.)

But NSN's ability to capitalize on the opportunity to sell equipment and services into Motorola's operator customer base will depend on how well it can manage the acquisition if the deal goes through as planned by the end of this year, analysts say.

While the move appears to answer several questions about how NSN could strengthen its position in North America, Asia/Pac, and within key operators worldwide, the deal also throws up a host of questions for NSN about product portfolios, WiMax customer support, the migration from WiMax to TD-LTE, and how it would generally execute such a deal. (See NSN Back in Love With WiMax.)

Here's a rundown on what some industry and financial analysts think about NSN's grand plan:

  • "Execution is the big risk…[such as] maintaining R&D production, employees, [doing] cost rationalization where they need to," according to Matt Thornton, senior analyst at Avian Securities LLC , who notes that NSN "doesn't have a gargantuan balance sheet."

    From a financial point of view, Thornton says the valuation looks "very reasonable" for Motorola's assets. "If you're NSN, you get customer footprint and North American exposure… at a reasonable price, and [the deal is expected to be] cash flow and margin accretive."

  • Nomura International 's global technology specialist, Richard Windsor, says that this deal would give NSN access to customers, but he questions what that opportunity will actually be for NSN.

    "Given that Motorola has been seen as a vendor that's on the way out, a lot of carriers may have already gotten out of their long-term commitments with Motorola," says Windsor. "So, what looks like a customer opportunity may not be."

  • Heavy Reading senior analyst Gabriel Brown feels NSN's choices about which products to support will be important. NSN will need to "act and communicate decisively" about its product portfolio plans, he says.

    "NSN will have learnt its lesson from the Nokia-Siemens merger about the need to streamline the product portfolio," says Brown. "CDMA is straightforward because NSN does not have its own CDMA products. The point that's up in the air is LTE and, especially, Motorola's WiMax-to-LTE migration strategy."

    Heavy Reading believes that Nokia Siemens will continue to make the Flexi Multiradio Base Station (BTS) platform its primary LTE platform. "But where does this leave WiMax?" questions Brown. "The CDMA-to-LTE strategy, as pursued by KDDI Corp. in Japan, will also need attention."

  • Heavy Reading senior consultant Berge Ayvazian also stresses the need for decisiveness on how NSN will handle the migration from WiMax to TD-LTE for Motorola's WiMax customer base of 41 operators in 21 countries.

    "Half of Motorola's incumbent relationships are represented by this WiMax base," says Ayvazian. "These operator customers will be watching closely over the next six months and prior to the closing of the acquisition. Motorola will need to act and communicate decisively on this point, and the hand-off to NSN will be key to retaining and expanding these relationships."

  • CCS Insight 's Paolo Pescatore, director of operator strategy, says NSN's acquisition of Moto's wireless infrastructure business is "timely." But how NSN decides to support Motorola's WiMax customers in their next-generation migration plans is not what matters now.

    "It doesn't really matter," says Pescatore, "because [NSN] have got their bases covered. NSN could say: 'We can continue to support you on WiMax or move you to TD-LTE.' "

    — Michelle Donegan, European Editor, Light Reading Mobile

About the Author(s)

Michelle Donegan

Michelle Donegan is an independent technology writer who has covered the communications industry for the last 20 years on both sides of the Pond. Her career began in Chicago in 1993 when Telephony magazine launched an international title, aptly named Global Telephony. Since then, she has upped sticks (as they say) to the UK and has written for various publications including Communications Week International, Total Telecom and, most recently, Light Reading.  

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