Nokia (NOK) is stepping up to buy German industrial giant Siemens out of NSN, taking full control of the most profitable part of its business. Nokia’s half of NSN has helped the struggling Finnish phone maker add to its cash reserves in recent months, even as its handset business continues to drain cash from the company. Those cash reserves will finance most of the $2.2 billion purchase price, and Siemens is loaning Nokia $650 million to finance the remainder.
NSN (Nokia Siemens Networks) is the world’s second largest maker of mobile infrastructure equipment behind fellow Scandanavian giant Ericsson. The joint venture has struggled to remain profitable in recent years. Like Nokia, NSN slashed tens of thousands of jobs last year. Unlike Nokia, NSN has made it back into the black, with six consecutive profitable quarters under its belt.
Siemens, which is involved in industries ranging from freight tranis to home appliances, is ready to exit the increasingly competitive wireless infrastructure business. Earlier this month the Wall Street Journal reported that Siemens and Nokia were trying to sell the jv to a private equity firm, and were in parallel talks about Nokia buying out Siemens.
Nokia, once the world’s largest mobile phone maker, could become a stronger competitor to rivals Huawei and ZTE with full control of NSN; both of the Chinese companies are major players in telecom infrastructure. Although NSN has not been a big beneficiary of U.S. carrier spending on 4G LTE equipment, it has won a number of key 4G LTE contracts in Cananda, Japan and even in rival Samsung’s home base, South Korea.
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