Nokia (NYSE:NOK) and Siemens, which confirmed they are open to making a deal with a private equity firm for an investment in Nokia Siemens Networks, will have a difficult time extricating themselves from the joint venture, analysts said. Instead, the only viable long-term option will be an initial public offering.
The Financial Times, citing an unnamed source familiar with the situation, said earlier this week that "a handful" of potential investors are interested, and that a deal could be worth up to $1 billion and lead to an eventual IPO.
An IPO remains a likely option because there are few companies willing to acquire the joint venture between Nokia and Siemens, which is set to end in 2013. Analysts said industry leader Ericsson (NASDAQ:ERIC) would likely face anti-trust concerns if it were to go after NSN, Alcatel-Lucent (NASDAQ:ALU) is still dealing with its own integration issues, and Huawei has been reticent to talk about acquiring a Western rival, possibly due to government security concerns.
"Taking it public is really the only option," Hannu Rauhala, an analyst at Pohjola Bank in Helsinki, told Reuters.
Nokia and Siemens launched their networks joint venture in 2007, which posted a $2.1 billion operating loss in 2009. Nokia Siemens began a broad restructuring and cost-cutting program late last year. The company aims to reduce expenses by $733 million annually by the end of 2011 compared with the end of 2009, which analysts said was key to any IPO or exit by the parent companies.
However, if Nokia is able to unload Nokia Siemens from its balance sheet, analysts said the move could give the world's largest handset maker more cash to potentially spend on acquisitions as it seeks to stay competitive in the smartphone market.
For more:
- see this Reuters article
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