Despite Conflicted Parents, NSN Reportedly Considering Nortel MEN Bid

Joint ventures, by their very nature, are complicated beasts. Even when the parent companies get along and are relatively aligned in their strategic directions, differences arise.

Sometimes joint ventures experience mild personality disorders resulting from the conflicting or diverging needs of the parents. Occasionally, though, when the discrepancies between parent companies are pronounced, the joint venture can exhibit all the behaviors and tendencies of a bipolar psychotic.

I think that’s what we’re witnessing at Nokia Siemens Networks (NSN), the loss-making joint venture between Finland’s Nokia and Germany’s Siemens. The latter partner has lapsed into depressed passivity, unsure whether it has the heart, the stomach, or the wallet for protracted losses in the telecommunications-gear market. Nokia, however, after taking its lumps and its goodwill writedowns, is enthusiastically gearing up for another run, with particularly keen emphasis on the wireless operators of North America as prospective customers.

So, if you’re wondering why Siemens and Nokia supposedly can be seriously weighing their ongoing commitment to NSN a few weeks ago and then reportedly pondering an auction bid for insolvent Nortel Networks’ Metro Ethernet Networks (MEN) business as of yesterday, you have to understand both the nature of joint ventures and the characters of these two parent companies.

As Nokia comes under increasing attack from low-end handset vendors in the developing world and high-end smartphones from the likes of Apple, Palm, and licensees of Google’s Android mobile operating system, it is desperate to strengthen its increasingly tenuous grip on carrier relationships, especially in North America, where its traditional weakness has become particularly egregious. For Nokia, then, NSN is a strategic bulwark, one it’s not yet ready to abandon.

For Siemens, well NSN is . . . what, exactly?

At one time, I’m sure NSN made sense for the German engineering conglomerate, and if Siemens Enterprise Communications (another joint venture, this one with Gores Group) had been successful in wresting Nortel’s enterprise business from Avaya at an earlier auction, there might have been some reciprocal synergies worth exploring. Now, though, it’s easy to understand Siemens’ gloomy ambivalence toward the whole project. Just how does NSN serve Siemens’ overall strategic objectives?

It’s an open question.

Anyway, getting back to NSN’s prospective interest in Nortel’s MEN business, I suppose a bid is entirely possible, especially if Nokia is driving the bus.

As I type this post, CIena’s $521-million cash-and-stock bid is the pacesetter in the forthcoming MEN auction. Actually, Ciena is only entrant to declare formal interest, though speculation has built in recent days regarding potential bids from Ericsson (possible), Cisco (is John Chambers suffering a late mid-life crisis?), and Infinera (possible).

Keep in mind, however, that, as of now, NSN has not thrown its hat into the auction ring. It could be that the reports we’re reading are just trial balloons, meant to test reactions and flush other bidders from hiding.

Either way, the clock is running on prospective bidders. As reported by Light Reading, the deadline to submit bids for the Nortel MEN auction is Monday, Nov. 9, with the auction itself scheduled for Friday, Nov. 13.

Let’s hope the bidders, and Nortel’s creditors, aren’t superstitious.


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