Nokia Corp and Siemens AG have focused to restructure their joint venture in telecommunications-networking equipment.
The deal popularly known as Nokia Siemens Networks is adopting a self-help strategy for the business. Under the deal, each company will put more cash into the venture.
Talks to sell a controlling stake in the venture failed as private-equity firms such as Kohlberg Kravis Roberts & Co. and TPG Capital dropped the idea of auction earlier.
According to Nokia spokesman, “NSN has real momentum and innovation, and shareholder interests are aligned in building a strong and profitable company” and declined to further comment on the issue.
Nokia and Siemens each own 50% in the venture, but Nokia has four of its seven board members in the board. Nokia Siemens has more than 60,000 employees.
Nokia consolidates the venture?s results in its financial statements. With Nokia Siemens Networks losing nearly $1 billion last year, the sale of a majority stake could have made a dent on Nokia?s results.
Siemens, on the other hand, is frustrated with Nokia?s inability to find a solution. Industrial experts believe that the potential outcome of the deal would be Siemens taking control of the venture.
Nokia Siemens has had three consecutive quarters of strong revenue growth. The venture recorded $18.02 billion in revenue last year, which is roughly 30% of Nokia?s total. The venture had an operating loss of ?686 million last year and ?1.6 billion loss the year before.
Bankers valued the venture at about $3 billion.
NSN has stiff competition from rivals such as Ericsson. Nokia is also having tough competition from Apple and Google. The share value of Nokia has declined considerably following the announcement that it may not achieve any profits. The American depositary receipts fell 2.3% to $5.88 in New York Stock Exchange.
Source: Wall Street Journal