Siemens may exit NSN as market looks to Ericsson result

Caroline Gabriel/Rethink Wireless
22 Oct 2009
00:00
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All eyes are on Ericsson, which reports its third quarter tomorrow and is expected to improve its market share, at the expense of Nokia Siemens and its own profit levels.

The Swedish leader is a key bellwether for the whole sector, and if its results reflect any upturn in the troubled infrastructure segment, this will also point to the scale of the problems at NSN, whose terrible quarter dragged Nokia into an unprecedented loss last week.

While the handset sector is recovering nicely on a boost in consumer spending and normalized inventories, the infrastructure business was always going to be slower to show green shoots, operators having deferred many investments while they weathered the storm.

But the loss of profit and market share at NSN is expected to be worse than at key rivals like Ericsson and Huawei, showing that the joint venture has problems that go beyond the economy. There is even rising speculation that the JV's parents would like to divest the firm, though it is unlikely to find a buyer prepared to pay a respectable price.

A report in the Financial Times Germany says that Siemens has wanted to exit the venture, its only remaining telecoms business, “for some time,” and that Nokia is starting to think the same way. But “I cannot imagine that NSN in its current state could be of any interest to a financial buyer,” said the newspaper, quoting financial sources.

Nokia CEO Olli-Pekka Kallasvuo officially remained committed to the venture, but the firm was forced to write down its stake in NSN by €908 million ($1.36 billion), erasing all the goodwill in the asset.

Siemens said last month that it would take “a very close look” at the valuation and the ensuing writedown could set the stage for a sell-off, halfway through a six-year JV deal.

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