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Why Is NSN Only Worth $4.4B?

Ray Le Maistre

The news that Nokia Corp. is buying the half of Nokia Siemens Networks it doesn't already own from Siemens AG for just €1.7 billion (US$2.22 billion) came as something of a surprise for a number of reasons. (See Nokia to Take Full Control of NSN.)

The general industry consensus was that Siemens would sell its stake to private equity investors or seek an IPO. It was less likely Nokia would take full control because of the Finnish handset giant's already pressured finances.

Equally surprising was the valuation. With Nokia due to pay only €1.7 billion for half of NSN, even those that are mathematically challenged could quickly figure that the deal values the vendor at just €3.4 billion ($4.44 billion).

That's less than half the valuation suggested in recent reports about Siemens's efforts to offload its stake.

And according to NSN, it ended the first fiscal quarter of 2013 with net cash of €1.5 billion ($1.95 billion).

So why is the valuation so low?

Bengt Nordstrom, CEO of mobile industry consultancy Northstream, believes there might be a level of detail that hasn't yet been disclosed.

"Analysts who have assessed NSN are saying a sum of the parts is worth in the region of €7-8 billion [$9.1-10.4 billion]," he notes in an email to Light Reading, pointing out that there appears to be "a gap in the valuation of NSN and the agreed price. But there are likely parts in this acquisition that we still don't know about... To speculate, this lower valuation might be explained by Nokia owning NSN IPRs. It could also be down to reports that NSN is in the process of selling its production facilities to third parties. "We'd expect more announcements to be made around the valuation that would explain why Siemens is accepting a low evaluation," states Nordstrom.

Overall, he thinks the deal is positive for NSN as it gives the vendor "the chance to capitalize on increasing LTE deployments over the next two years. With Chinese vendors unable to sell in North America, NSN also has the chance to become the number one or number two vendor for U.S. operators."

-- Ray Le Maistre, Editor-in-Chief, Light Reading

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7/3/2013 | 12:53:28 PM
re: Why Is NSN Only Worth $4.4B?
Does Nokia has so much money to pay ? Who are other competitors for Nokia in LTE space ?
7/3/2013 | 12:48:23 PM
re: Why Is NSN Only Worth $4.4B?
How will it
Ray Le Maistre
Ray Le Maistre
7/2/2013 | 9:50:04 AM
re: Why Is NSN Only Worth $4.4B?
I think that's a very interesting question... it really depends what baggage comes with the divorce settlement.
7/2/2013 | 9:12:01 AM
re: Why Is NSN Only Worth $4.4B?
Siemens have a terrible track record of selling businesses. They tried to sell their solar business recently but couldn't find a buyer and are shutting it down. In the past they paid BenQ (remember them?) EUR250m to take their mobile phone business off their hands. They have been trying to IPO their lighting business Osram for the last 2 years. They are still trying to get rid of their baggage handling business too if you have any spare change.
R Clark
R Clark
7/2/2013 | 8:35:50 AM
re: Why Is NSN Only Worth $4.4B?
I suspect the low valuation is because Siemens is desperate to get it off its books but they can't find a buyer, The irony is it''s now the best-performing part of Nokia
7/1/2013 | 7:07:57 PM
re: Why Is NSN Only Worth $4.4B?
The better question is, have Nokia overpaid even at the deal price?
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