Nokia Siemens Networks (NSN) - a 50-50 joint venture between
) - is selling its optical network unit to Marlin Equity
Partners, a private equity firm for an undisclosed amount. The
divesture is part of the company's broader plans to concentrate
more on its core mobile broadband business.
Per the deal, 1900 employees of NSN, based in Germany, Portugal
and China would be transferred to a new company established by
Marlin Equity Partners in Munich. The private equity firm plans
to become a market leader in the optical networking business
through the acquisition of NSN's unit. The deal is expected to
close in the first quarter of 2013.
Selling the optical unit is the second cost cutting initiative
taken by the company in the last 5 days. Prior to it, the company
had announced its intention to close a plant in Bruchsal, Germany
and eliminate 650 jobs in due course latest by 2013.
The leading telecom equipment manufacturer NSN has been going
through a tough time for quite some time. Though the company has
a strong GSM portfolio, it lacked severely on the CDMA front,
which is the most dominant network used in the lucrative North
American market. Moreover, by offering lower bids for network
infrastructure contracts, the Chinese vendors like ZTE and Huawei
Technologies provided stiff competition to the company.
In a bid to overcome this difficult situation, the company is
reducing its operating cost by retrenching employees and selling
its non-core business units. NSN plans to lay off 17,000 or 23%
of its work force and expects the restructuring to result in an
annual cost reduction of approximately $1.35 billion by 2013.
So far this year, the company has trimmed about 13,000 of its
work force and has made five divestments, which include selling
some of its internet protocol television (IPTV) assets to
). NSN is also in the final lap of negotiations to sell its
Business Support System unit to
) and some private equity firms.
We believe offloading its non core assets will help the company
focus solely on its wireless broadband business as telecom
carriers continue to upgrade their network to support the massive
demand for mobile data and video.
We retain our long-term Neutral recommendation on Nokia Corp.
However, it holds a Zacks #2 Rank, implying a short-term Buy
ACCENTURE PLC (ACN): Free Stock Analysis
AMDOCS LTD (DOX): Free Stock Analysis Report
ERICSSON LM ADR (ERIC): Free Stock Analysis
NOKIA CP-ADR A (NOK): Free Stock Analysis
SIEMENS AG-ADR (SI): Free Stock Analysis
To read this article on Zacks.com click here.