Nokia Siemens to buy Motorola wireless unit

After years of troubled business environment and contemplations on how best to reduce costs without hurting the very essence of its vision, Motorola Inc. has finally announced that it is selling most of its wireless network division to Nokia Siemens Networks, a Finnish-German joint venture, for $1.2 billion as part of a planned breakup of the company.

The division supplies wireless carriers such as Verizon Wireless and Sprint Nextel Corp. with the equipment they need to connect to cell phones. Ordinarily, it would appear that the Motorola unit is not a big player in an industry dominated by LM Ericsson AB and Alcatel-Lucent, but the Nokia Siemens management is strategic in the transaction because this Motorola unit enjoys a valuable relationship with U.S. and Japanese carriers and those are the target of Nokia Siemens.

By this transaction, an estimated 7,500 employees will be transferred to Nokia Siemens, according to Motorola. The company is based in Schaumburg, Ill., but the networks division has large development centers in India and China.

Nokia Siemens Networks - a joint venture between Finland's Nokia Corp. and Siemens AG of Germany - has seen dwindling profits in recent years, worsened by the global economic downturn. The deal, expected to be completed by the end of the year, would improve profitability and “have significant upside potential,” Nokia Siemens said.

Motorola has planned for years to spin off the division that makes cell phones, but steep losses in the unit have forced it to postpone the move. The spin-off is now scheduled for the first quarter of next year.

The handset division, to be called Motorola Mobility, would take with it the division that makes cable set-top boxes.
That would leave Motorola Solutions, the remainder, focused on government and corporate clients, with products such as police radios and bar-code scanners. The American company is also keeping one part of its wireless network portfolio: the division that makes iDEN equipment, used in the Nextel part of Sprint Nextel Corp.'s network. Motorola invented that technology and is the dominant supplier of equipment.

Its push-to-talk feature is appreciated by dispatchers and work crews, but has been overshadowed in the mainstream by other technologies that provide broadband data speeds.

The wireless division has had some success in the business of making equipment for broadband networks that use WiMax, but that technology looks set to be a niche at best. The major wireless carriers are planning to adopt LTE. To date, Motorola has not secured any LTE contracts in the U.S., but has signed one with KDDI in Japan.

Since the announcement, Motorola’s shares have shown consistent rise
The deal is expected to be closed by the end of this year pending approval from regulatory authorities, the companies said in a joint statement.

“This is an exciting acquisition that I believe has significant benefits for customers, employees and our shareholders,” Nokia Siemens Networks chief executive Rajeev Suri said in a comment.
Motorola co-chief executive Greg Brown welcomed the deal describing it as “great news for our customers, our investors and our people.”

The agreement is expected to give Nokia Siemens Networks ties with more than 50 operators and “strengthen its position with China Mobile, Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone”, the group said.  
In another development as a result of the deal, Motorola said that it plans to change its name to Motorola Solutions Inc. after it splits off its cell phone business into a separate company.

The cell phone and TV set-top box businesses will operate as Motorola Mobility.
The divisions that will operate under the name Motorola Solutions include the various products Motorola makes for businesses, such as network equipment and bar code scanners.

The long-planned split, which was put on hold during the recession, is scheduled for the first quarter of next year.
As a result of the deal also, Nokia Siemens will automatically emerge the number two network in North America thus allowing it overtake Huawei. Nokia Siemens’ revenues from North America fell by 9 per cent in the first quarter of this year to 153m euros ($198.5m; £129m).

The deal is also expected to enhance position of Nokia Siemens Networks in key wireless technologies and it will give the company large global footprint in CDMA segment of the industry.

 “This is an exciting acquisition that I believe has significant benefits for customers, employees and our shareholders,” said Rajeev Suri, chief executive officer of Nokia Siemens Networks. “Motorola’s current customers will continue to get world-class support for their installed base and a clear path for transitioning to next generation technologies while employees will join an industry leader with global scale and reach. Nokia Siemens Networks will see the benefit of a deal that is expected to enhance profitability and cash-flow and to have significant upside potential.”

 "Motorola is very proud of the operational and financial performance of our Networks business and its employees, who will now become a valuable addition to Nokia Siemens Networks. We are excited to have reached this agreement to combine our Networks team with such an industry leader," said Greg Brown, Co-CEO of Motorola. "This is great news for our customers, our investors and our people and will allow us to sharpen our strategic focus on providing mission and business critical solutions for our government, public safety, and enterprise customers.”

 Commenting on the new relationships that the transaction is expected to add to its portfolio, the NSN boss said: “We are pleased to be able to add new relationships with some customers, and reinforce our position with others,” said Suri. “I believe the addition of Motorola’s Networks business will significantly strengthen our worldwide presence, enhance our scale in the United States, Japan and other priority regions and reinforce our leadership position in the global wireless sector.”
 “Verizon views today’s announcement as good news for the global wireless industry,” said Richard J. Lynch, executive vice president and chief technology officer of Verizon. “This deal brings together two important Verizon suppliers; we look forward to our continuing work with Nokia Siemens Networks.”

 Nokia Siemens Networks expects that based on revenue, with the addition of the Motorola wireless network infrastructure business, it will become the number three wireless infrastructure vendor in the United States, the number one foreign wireless vendor in Japan, and strengthen its current number two position in the global infrastructure segment.

 Motorola’s networks infrastructure business provides products and services for wireless networks, including GSM, CDMA, WCDMA, WiMAX and LTE. This business is a market leader in WiMAX, with 41 contracts in 21 countries; has a strong global footprint in CDMA with 30 active networks in 22 countries; and a robust GSM installed base, with more than 80 active networks in 66 countries; and excellent traction with LTE early adopters.

 “As customers look to transition from CDMA networks to next generation technologies, the addition of the Motorola wireless network infrastructure business is targeted to ensure that we are well placed to meet those needs,” said Bosco Novak, head of Customer Operations at Nokia Siemens Networks. “Together, we will utilise the combined strength of Nokia Siemens Networks’ TD-LTE solutions and Motorola’s WiMAX and LTE businesses, to better meet customers’ evolving technology and business needs.”