As reported earlier on The Deal Pipeline (subscription required), bankrupt Nortel Networks Corp. has
accepted a $650 million stalking-horse bid from Nokia Siemens Networks BV for its wireless infrastructure business.
Though the Nortel liquidation now under way is not a surprise at this point, it's still a breathtaking fall for a 127-year-old company that had a market cap as high as $250 billion during the telecom bubble of the 1990s. Earlier in the week, the government
declined to bail out what had been the biggest company in Canada.
But Ottawa did see fit to give Nokia Siemens significant help in financing its purchase, in the form of a
$300 million loan from Export Development Canada, the government-owned export credit agency.
The fact that the loan seemed necessary even at that rock-bottom price says a lot about the state of the sector. So, for that matter, does the very existence of Nokia Siemens, a 50-50 joint venture
the two companies created in 2006. By folding their equipment businesses together, Nokia Corp. (NYSE:NOK) and Siemens AG (NYSE:SI) have been trying to stay a step ahead of the rapid consolidation in the business.
It can't be easy, with the global recession accelerating a shakeout that was already severe, as witness the travails of such players as Alcatel Lucent (NYSE:ALU) and Motorola Inc. (NYSE:MOT).
In Nokia's
first-quarter earnings call in April, Nokia CEO Olli-Pekka Kallasvuo updated the bad news: Instead of the previously anticipated 5% decline in sales for the JV in 2009, the parent company now expects a 10% drop. Sales for the quarter were €3 billion ($4.2 billion), a greater-than-normal seasonal decline. The focus at the business, he said, would be on cost controls and working capital management.
And, as it turned out, on buying previously precious assets out of bankruptcy for a song, with a bit of government help.
Nokia Siemens is
led by CEO Simon Beresford-Wylie, an Austrialian who previously worked for Nokia. Head of strategy and business development at the JV is Michael Matthews, another Australian, who previously was chief marketing officer at Amdocs Inc., a provider of software and services for communications companies.
They and the rest of the leadership team will doubtless get a crack at more distressed or bankrupt assets before too long. Nokia Siemens was also
reportedly interested in Nortel's Metro Ethernet unit. -
Kenneth Klee
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