Nokia (NOK) Acquires Siemens' (SI) 50% Stake in NSN

Shares of Nokia (NOK) rose 4% last week, after the company reported that it will acquire Siemens' (SI) 50% stake of its joint venture, Nokia Siemens Networks (NSN). Nokia will pay 1.7 billion euros ($2.2 billion) to take over the mobile telecom equipment manufacturer, which was the Finnish handset maker's only profitable business segment last quarter.

NSN also accounts for roughly half of Nokia's revenue, due to the diminished size of its mobile handset segment. NSN is currently the third largest manufacturer of mobile telecom equipment in the world, after Ericsson and Huawei. Daily Chart
Nokia, which had $13.51 billion in cash and $7.28 billion in debt at the end of last quarter, should be easily able to afford the acquisition. After the acquisition, NSN will become the company's most significant business, and will account for two-thirds of the company's top line. This is a wise strategy in a time when the future of its Lumia Windows Phone is still unclear. Microsoft (MSFT) Windows Phones, 80% of which are manufactured by Nokia, currently claimed the number three spot in the mobile OS wars, with a 3.2% global market share at the end of the first quarter. Although that trails Android's 75% and iOS' 17% by a wide margin, it was a significant increase from the 2.0% market share it reported in the prior year. Although NSN dragged on both Nokia and Siemens' bottom line growth when the joint venture was conceived in 2007, the mobile network equipment business has been booming lately thanks to increased demand for higher-speed 4G and LTE networks. NSN also gained significant market share in 2012, when it briefly took over the No. 2 spot in the third quarter of 2012. Even though the joint venture is a more lucrative investment today, Siemens is attempting to slim down to its core businesses (industry, energy, transportation, healthcare), after its revenue declined 6.7% year-on-year last quarter. Nokia's takeover of NSN also comes in at a much lower price than some analysts had estimated. There was speculation that Siemens would force Nokia to pay a significant premium up to 2.5 billion euros for the stake, which is valued at 1.7 billion. In the end, Siemens accepted Nokia's 1.7 billion offer, much to the relief of Nokia shareholders. Nokia will face two major tests soon. The first will be its sales of the Lumia 925, the lighter variant of its popular flagship Lumia 920. If sales are strong, then it will indicate continued demand for Windows Phones, which bodes well for the future of the platform that Nokia dominates. The second will be the death of its aging OS Symbian this summer. Once Symbian is phased out, analysts will be watching if these feature phone users (many of them in emerging markets) finally upgrade to Nokia's Windows Phones. If Nokia can pass both tests, as its NSN revenue and profits continue growing, then the company could have a bright future ahead. Other News About NOK Nokia Oyj: Today's Featured Telecommunications Winner Nokia has a lot to gain and little to lose with the NSN acquisition. Nokia Extends Feature Phone Family Nokia still believes in the feature phone as smartphones rule the market. Other Stocks in the News In China, Nestle and Danone Play it by the Book Nestle and Danone are forced to slash prices in China. WhytheMortgageREITSectorWasSlammed The mREIT sector has its worst day since 2011. Copyright 2013 by, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. We are not responsible for claims made by advertisers and sponsors. Anyone who makes decisions based on what they read here does so at their own risk and cannot hold WebFinance Inc. (DBA, Inc.) or its employees responsible.

Published on Jul 12, 2013
By Leo Sun
Leo Sun
Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.

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