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Nokia-Siemens Fail To Secure Investors

Nokia Corp and Siemens AG failed to secure a deal for investors for a controlling stake in their unprofitable joint venture. The companies, which could not be immediately reached for comment, are now weighing investing more money in the venture, which is called Nokia Siemens Networks (NSN).

Talks to sell a controlling stake in the venture, which is the world’s No. 2 maker of wireless-networking gear, to a consortium that includes private-equity firms Gores Group LLC and Platinum Equity LLC are not expected to succeed.

According to Earl Lum, chief of telecom gear industry research firm EJL Wireless, “Any potential investor would need to see some light at the end of the tunnel with regards to profitability for NSN.”

Nokia and German industrial group Siemens merged their telecom equipment businesses on a 50-50 ownership basis in 2007 in a six-year deal, hoping to quickly reach double-digit margins, but the venture has struggled to make a profit.

Currently, Nokia and Siemens each owns half of the business, but Nokia holds four of the seven board seats. With Nokia Siemens Networks losing nearly $1 billion last year, the sale of a majority stake would have let Nokia eliminate a major drag on its financial results.

Siemens has been frustrated with its partner’s inability to find a solution and Siemens could take control of the joint venture. Private equity firms KKR and TPG still could strike a deal that would involve them taking a small stake in Nokia Siemens.

This is backed by the Financial Times reporting earlier this month that the two private equity firms had deciding against bidding for a stake in the venture after failing to agree on price and level of control. Finally, earlier this month, Nokia said it was in talks with “multiple parties” about its stake in Nokia Siemens Networks.

Photo Courtesy of michael_reuter
Photo Courtesy of niallkennedy