Seeking to right a ship that has tottered since it was launched, executives at Nokia Siemens Networks are seeking up to $1 billion in new investment from major private equity funds, several outlets reported over the weekend.
“Some of the world’s biggest private equity groups – including Blackstone and TPG – are in talks with Nokia Siemens Networks about investing about $1bn for a minority stake in the mobile infrastructure company," reported The Financial Times.
The talks come just weeks after NSN’s deal to purchase Motorola Inc.’s wireless infrastructure business for $1.2 billion. Under that purchase, Nokia Siemens, the world’s 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.
The Motorola buy marked a big win for NSN but does not solve the underlying problems that have plagued the joint venture since its founding in 2007. The company has faced fierce competition not only from Swedish rival Ericsson but from new, low-cost Chinese vendors Huawei and ZTE. Amid rumors that parent companies Nokia and Siemens were both looking for an exit from the JV, NSN last year outsourced basic functions such as marketing and human resources to cut costs. Those moves enabled NSN to reduce operating losses to $234 million in the most recent quarter, but sales continue to decline and the company has not described a compelling technological roadmap that will enable to it to differentiate itself going forward.
Late last year NSN lost to Ciena Corp. in a fiercely contested auction for bankrupt Nortel Networks’ optical assets.
A cash infusion from private equity groups could help NSN stave off competitors long enough to forge a viable strategy, as wireless carriers in the U.S. and abroad roll out 4G networks. Or it could be a way for the parent companies to shore up the business long enough for them to find the escape hatch.
