June 19, 2006

Nokia Corp. and Siemens AG struck a deal to combine Nokia’s Networks Business Group with Siemens’ fixed and mobile networks operations, creating a 50-50 joint venture to be called Nokia Siemens Networks.

The companies noted that their infrastructure businesses currently generate a combined $20 billion in revenue annually.

The companies said they expect the venture to produce costs synergies of $1.9 billion by 2010. Approval of the joint venture is expected by the end of this year, with some 60,000 employees working for the new company. Over the next four years, the companies said they would likely cut about 9,000 jobs out of the combined operations.

The move places both Siemens and Nokia in a stronger position to compete with Swedish powerhouse L.M. Ericsson, the world’s largest telecommunications infrastructure company. The companies said that based on current market share data, Nokia Siemens Networks will be the second largest company in mobile infrastructure behind Ericsson.

“This joint venture is an important step to strengthen our position in the market sustainably and to enable us to offer the best state of the art converged technologies and services to our customers,” stated Klaus Kleinfled, chief executive officer of Siemens. “This combination creates a leading industry player with immediate strength, excellent potential for growth and well-positioned to improve future profitability.”

Simon Beresford-Wylie, executive vice president and general manager of Nokia Networks, is set to serve as CEO of Nokia Siemens Networks. Peter Schonhofer, currently a member of Siemen’s executive board, will take on chief financial officer duties after the closing.

The new company will be headquartered in Helsinki, Finland, but it will have regional headquarters in Munich, Germany, where three of five future divisions will be based.

Nokia is the world’s largest cell phone maker, but the company’s infrastructure business has long been somewhat of a sore spot in the company’s overall financial position. Siemens used to sell mobile phones, but offloaded that business to Taiwanese manufacturer BenQ Corp.

Source: RCR News