Yesterday I wrote that joint venture Nokia Siemens Networks (NSN) wasn’t in a position to contend for insolvent Nortel’s optical- and Ethernet-networking assets, which have received a stalking-horse auction bid of $521 million in cash and stock from Ciena.
Previously, I had wondered whether the joint venture’s two parent companies, especially Siemens, would remain committed to the struggling spinoff endeavor. Both parents have said they would incur massive goodwill writedowns on the joint venture, but they made encouraging noises about keeping it going and getting it back on track.
Behind the scenes, however, both companies are thinking long and hard about whether NSN warrants further expenditures of time, effort, and — most important of all — money.
If a report in Financial Times Deutschland, as referenced by Reuters, is correct, Nokia and Siemens would like to sell their stakes in the joint venture, but they are hard pressed to find a buyer for the tarnished asset.
Said sources familiar with the situation:
“Siemens has been wanting to get out for some time, Nokia now (wants out) too.”
“I cannot imagine that NSN in its current state could be of any interest to a financial buyer.”
Beaten like a drum by competitors Ericsson and Huawei in the wireless-networks market, Nokia Siemens Networks has been losing market share and money. In the July-September quarter, the joint venture sustained an operating loss of 53 million euros ($78.88 million), with losses expected to extend through the current quarter and likely beyond.
The joint venture is cutting costs wherever possible, including through outsourcing of managed application services, but the prospects for near-term revenue growth aren’t bright.
Not particularly enamored of its IT-related investments lately, engineering conglomerate Siemens AG apparently would like a complete exit from telecommunications.