File under “big in Japan:” Nokia Siemens Networks will acquire Motorola Inc.’s wireless infrastructure business for $1.2 billion, and the deal that is all “about customers,” according to Rajeev Suri, CEO at NSN. The sale will effectively take Motorola out of the carrier networks business for all but iDEN and patent licensing.
NSN, the No. 2 global telecom infrastructure vendor, will take over Moto’s LTE, CDMA, WiMAX, WCDMA and GSM portfolios and the customer relationships that go along with them, including with Sprint-Nextel Corp., Clearwire Corp., KDDI, China Mobile and others. Gaining an incumbent position in several new operators’ networks will vault NSN from No. 5 to No. 3 in the United States, and up to No. 1 in Japan.
“We’ve never made a secret about our ambitions in North America,” said Suri during a conference call with media. “And you can rest assured our ambitions do not end there.” Japan is another critical market, he added.
NSN, along with many of its overseas brethren, historically struggled to gain purchase in North America, where homegrown vendors like Nortel Networks and Motorola dominated the landscape. That’s begun to change recently, with rival and No. 1 global vendor Ericsson notably winning new deals and buying a big position with its Nortel Networks LTE and CDMA acquisition earlier in the year. NSN clearly has a competitive interest to keep up, especially in a market where a handful of national wireless carriers have big capex plans in the next 24 to 36 months as they transition their networks to the next generation. Motorola’s assets give the vendor a CDMA story, which it didn’t have before, and a better ability to help the big North American and Japanese companies that have legacy CDMA gear make that transition.
“This has been a strong CDMA market,” said Suri, noting that NSN does have its own contracts with T-Mobile USA, AT&T Inc., Verizon Wireless for its LTE core, and with Verizon and AT&T for optical transport. Nonetheless, “this is a spot we needed to cover,” said Suri. “It’s a beautiful addition to our customer portfolio.”
The deal also strengthens its already formidable LTE position — NSN has 15 commercial contracts and now gains Motorola’s LTE deal with KDDI. And, NSN gets 7,500 Motorola employees, about 1,600 of which are headquartered in Illinois. Suri said no layoffs were planned at this point, and NSN plans to maintain a strong Illinois presence as its flagship U.S. location.
For its part, Motorola will retain almost all of its patents related to the portfolio, with NSN receiving a cross-license for the IPR as part of the deal. Moto also will keep the iDEN business, which Motorola co-CEO Greg Brown said accounted for $400 million, most of that through business with Sprint.
“I believe this deal will enable our people to focus on what they do best,” said Brown, characterizing the sale as a positive for Motorola that will allow it to “sharpen its focus.” Motorola plans to spin off into two independently traded companies in early 2011 — Motorola Mobility, which is the connected home and wireless device business, and Motorola Solutions, which will be a pure-play infrastructure business aimed at government, public safety and enterprises that Brown will continue to lead.
He explained that the carrier business had no real home in Motorola’s future. “The network infrastructure doesn’t belong with mobile business,” he explained, and muddled the focus on the solutions business. He characterized the portfolio as mainly legacy-focused “that was declining top-line, so it made sense to clarify and sharpen the [solutions] portfolio.”
