Nokia, Siemens to merge telecom units

Jun 19, 2006 5:33 PM, By Donny Jackson

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Nokia and Siemens today announced a joint venture of their network-equipment operations to create one of the industry’s largest players, to be known as Nokia Siemens Networks.

To be based in Nokia’s homeland in Finland, the telecom-equipment combination will create a business unit with 60,000 employees, annual revenues of $20 billion and a product portfolio that will let the company offer end-to-end solutions in a marketplace demanding convergence of fixed and mobile assets.

“This new organization is perfectly suited to capitalize on those opportunities,” Siemens CEO Klaus Kleinfeld said during a webcast press conference. “We have a beautiful fit of two excellent companies that are joining forces.”

The boards of both companies have approved the venture, which is expected to close before the end of the year. Simon Beresford-Wylie, currently Nokia’s executive vice president and general manager of networks, will be CEO of Nokia Siemens Networks.

While 78% of the new entity’s revenues will come from GSM/EDGE/WCDMA wireless transport and wireless services—competing for the top global ranking in these areas—the company’s wireline market share is great enough to rank third in the world in that arena as well, Beresford-Wylie said.

With communications providers using IP to dissolve barriers to intermodal competition, having such a broad-based product portfolio is crucial to competing in the modern marketplace, said Olli-Pekka Kallasvuo, who became Nokia’s CEO just days ago.

“It’s second to none in being ready for the world of converging communications,” he said.

By combining the network operations, Nokia Siemens expects to achieve $1.5 billion in annual synergy savings. Beresford-Wylie said the company will continue to support existing Nokia and Siemens solutions but will look to combine their offerings into a single package in the future.

Coming on the heels of the Ericsson-Marconi and Alcatel-Lucent merger announcements, the Nokia-Siemens deal continues the consolidation trend that has typified both the carrier and vendor space. And Kleinfeld said Nokia Siemens does not plan to stand pat with this joint venture, noting that it is in “serious negotiations” with some partners to bolster its place in the enterprise market.