Thats because NSN continues to fight uphill financial and competitive battles. The company, a joint venture between cell phone-maker Nokia and gear-maker Siemens, has had troubles from the beginning. It started in 2007 not exactly the most optimal time to begin a new business, given the melting financial markets worldwide. At the same time, low-cost rivals Huawei and ZTE, in China, were gaining ground against the more entrenched companies such Alcatel-Lucent and Ericsson. Theyve continued making that headway and become serious challengers to NSNs success.
Then, amid ongoing financial struggles stemming from the recession, NSN late last year outsourced basic functions such as marketing and human resources in efforts to stay afloat. And theres been talk of Siemens selling its stake in the company, although the heads of both Nokia and Siemens late last year co-wrote a letter to reaffirm their support for the joint venture. On top of all of that, NSN lost to Ciena Corp. in a nail-biter auction for bankrupt Nortel Networks optical assets.
So, for industry observers to perceive a NSN purchase of Motorola assets as unwise, seems fitting. However, there are some bright sides to such a deal. NSN is doing well in the hot LTE sector, securing contracts with TeliaSonera, for example. And Motorola has money and operations issues of its own. Its splitting into two companies next year and if it can shed some properties, lighten the new structures load, perhaps thats a solid strategy. Besides, NSN has been looking for an avenue into North America so it can better compete against Huawei and ZTE, both of whom have yet to break past that same barrier because of governments concerns about security.
If NSN pursues the reported transaction, analysts say it could pay between $1.1 billion and $1.3 billion.