The Deal
Sunday, November 22, 
10:24 am

Dealwatch: Nokia-Siemens

  Share     E-Mail    Discussion    Print Story
Published June 21, 2006 at 9:58 AM
062006_siemens_nokia.jpgLooking to compete with the world's largest network equipment maker market leader—LM Ericsson—Nokia and Siemens announced Monday, June 19 they would merge their mobile and fixed-line networking equipment businesses in a deal valued at $31.5 billion. The proposed union would create the No. 3 network gear dealer behind Ericsson and No. 2 Lucent-Alcatel, which announced its merger only three months ago.

Continue reading below

Also on Dealscape

WHAT THEY DO

The network equipment sector creates the fiber optic cables, routers and wireless beaconsused by the communications networks of large phone carriers such as Verizon and Cingular.

BATTLING FOR A SHRINKING PIE

So, why merge?

  • The competition for business has become so fierce that survival dictates joining forces. Alcatel of France acquired cross-Atlantic rival Lucent on April 2, 2006 for $13.4 billion. The deal is currently going through a tedious approval process. The proposed union, if approved, would create the second-largest network equipment maker.
  • The telecommunication companies that network equipment providers sell to are themselves consolidating, meaning it has become increasingly harder to sell equipment with fewer buyers. AT&T has acquired BellSouth and Sprint merged with Nextel.
  • Plus, smaller network equipment firms from Asia have been able to undercut prices, causing even more pressure on sales. China-based Huawei has taken contracts in Asia that in the past belonged to the other big network equipment makers, such as Siemens and Lucent.

So with all signs pointing to a smaller network equipment maker sector, what will the new combination of Nokia and Siemens look like?

ANTICIPATION ...

The combination, which is labeled a 50-50 joint venture by both companies and will be known as Nokia Siemens Network, would have combined revenue of $20.5 billion. Nokia says the new company would have 60,000 employees when it begins operation, shedding an estimated 10% to 16% of its workforce. The job reduction would save the new company and estimated $1.9 billion by 2010. The companies said they expect the merger, which regulators must approve, to close by Jan. 1.

 

Dealwatch executive summary
The Date
The Action
6.19.06 Nokia and Siemens announce merger
4.02.06 Lucent, Alcatel merge and become the first of network gear makers to consolidate
3.07.06 AT&T buys BellSouth, signaling a sweeping round of consolidation among networking equipment makers
Source: The Deal

 

 



Categories



Post a comment





The Deal Pipeline

Deal Video


Inside The Deal: Avaya Inc.'s Mohamad Ali on the company's next target.

More video...

Crisis On Wall Street
Technology
Deals of The Decade

Community

Industry Insight

Managing your shareholder base

By Bradford P. Weirick and Joelle Khoury, Gibson Dunn

Growth companies and their PE sponsors should be wary of the pitfalls that arise when they layer on tiers of preferred stock.


Industry Insight

Easing the stress of distressed M&A

By Derek Watson, KPMG

Corporate buyers face numerous complexities when trying to identify the right moment to purchase a distressed asset.


Editor's Note

Editor's letter: Nov. 16, 2009

By Robert Teitelman

Beneath the veneer of Wall Streeters beats the same heart, stirred by the same determinants of behavior.


footspacer.jpg footspacer.jpg footspacer.jpg footspacer.jpg footspacer.jpg


©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.