Nokia to buy out Siemens stake in joint venture for $2.2B

Summary:The joint venture will become wholly-owned by Nokia, the Finnish phone maker announced on Monday, despite struggling with its own financial situation.

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Nokia's headquarters in Espoo, near Helsinki, Finland Image: Nokia

Nokia announced on Monday it has agreed to buy out Siemens' stake in the joint venture the two companies hold, following initial reports from Bloomberg on Sunday. 

The deal will see the Finnish phone maker buy and acquire the remaining 50 percent stake in the telecommunications equipment maker for €1.7 billion ($2.2bn). Around 70 percent of the acquisition will be paid for in cash, with the remaining 30 percent from a short-term bridge loan — a term for short-term financing with the possibility of a long-term extension.

It comes as little surprise to industry watches, following news last month that Siemens was reportedly mulling selling its stake, according to The Wall Street Journal.

Nokia chief executive Stephen Elop said in prepared remarks: "With its clear strategic focus and strong leadership team, Nokia Siemens Networks has structurally improved its operational and financial performance. Furthermore, Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity."

Siemens chief financial officer Joe Kaeser said the now wholly-owned Nokia company will continue to strengthen its core areas of business: energy management, industry and infrastructure, and healthcare. 

"The full acquisition of Nokia Siemens Networks by Nokia offers an attractive opportunity to actively shape the telecom equipment market for the future and create sustainable value," Kaeser added.

Nokia Siemens Networks (NSN), which formed in 2007, turned over €13.1 billion ($17.05bn) in 2011, adding €210 million ($273.5m) to Nokia's net cash position. But the joint venture has been struggling in recent years in the face of competition by rivals, not limited to Ericsson.

In a bid to improve profitability, the firm last year began to sell off non-vital business divisions and laying off staff. This was despite improving overall revenues by close to 50 percent in recent years, following the introduction of Nokia's incumbent chief executive Stephen Elop in September 2010.

One of the units sold by NSN includes the WiMAX networking equipment unit, a technology that failed to gain traction among cellular networks and other firms as 4G LTE, which is quickly becoming the universal standard for next-generation mobile broadband.

Early this year, the joint venture was planning a high-yield bond sale in order to determine whether there was any financial interest in the telecommunications equipment maker, according to one report . The news broke just weeks after it closed a factory in Germany , leading to 650 job cuts in the region.

Updated at 7:04 a.m. ET: with additional details following the formal announcement.

Topics: Nokia

About

Zack Whittaker writes for ZDNet, CNET, and CBS News. He is based in New York City.

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