One scenario under discussion for Nokia Siemens Networks is a joint buyout of Siemens’s 50 percent stake by Nokia and a strategic partner such as Alcatel-Lucent SA, which has held exploratory talks over a deal, said the people, who asked not to be identified because the matter is private. Discussions have accelerated as a shareholder agreement comes up for renewal in April and as Alcatel-Lucent prepares for the departure of its chief executive officer, they said.
Siemens has repeatedly said it wants to get out of the venture, which has an enterprise value of as much as 10 billion euros ($13.4 billion), according to estimates by Aalandsbanken analyst Lars Soederfjell.
Nokia Siemens and competitors such as Alcatel-Lucent have struggled with sputtering demand and losses as competition from Chinese rivals has intensified and Europe’s mobile operators, pressured by slowing growth, have curbed spending on equipment. Meanwhile, the German company, which manufactures products from power turbines to high-speed trains, is looking to focus on more profitable businesses.
“It’s hard to say what will happen to NSN, but in the end it won’t be in the hands of either Nokia or Siemens,” said Robert Jakobsen, an analyst at Jyske Bank A/S in Denmark.
Nokia shares jumped as much as 3.9 percent and closed 1.9 percent higher at 3.02 euros in Helsinki. Siemens closed little changed at 77 euros in Frankfurt.
Alcatel-Lucent gained 4.9 percent to 1.23 euros on the Paris exchange. The company said today CEO Ben Verwaayen will step down once a succession plan is in place after 2012 losses reached 1.37 billion euros.
The discussions between Espoo, Finland-based Nokia and Munich-based Siemens have been on and off and may not lead to an agreement anytime soon, the people said. An initial public offering of Nokia Siemens is also an option, though considered unlikely, said two of the people.
Nokia and Siemens abandoned talks with private-equity buyers in 2011 over a sale of the business as the buyout firms failed to come up with a compelling offer. Nokia Siemens has since returned to profit, helped by a plan to cut 17,000 jobs, even as Paris-based Alcatel-Lucent suffers from declining sales in Europe.
To be sure, Nokia may avoid buying more of Nokia Siemens because the mobile-phone manufacturer is focused on bolstering its cash reserves, Jakobsen said. Nokia reported its seventh consecutive decline in quarterly sales last month and omitted its dividend for the first time in 143 years, a decision it said will “ensure strategic flexibility.”
The handset maker, led by ex-Microsoft Corp. executive Stephen Elop, is trying to re-orient itself toward higher-end handsets like the Lumia smartphone, pitched as an alternative to Apple Inc.’s iPhone and devices running Google Inc.’s Android software.
All three major ratings companies rank Nokia’s debt three steps below investment grade, after Moody’s Investors Service lowered Nokia by two levels to Ba3 in July. The smartphone maker had net cash of 4.4 billion euros at the end of last year.
Performance at the venture with Siemens is now a relative bright spot for Nokia. Nokia Siemens’s most recent results topped Nokia’s earlier estimates with fourth-quarter operating profit of 14.4 percent of sales, excluding some items.
To contact the reporters on this story: Matthew Campbell in London at firstname.lastname@example.org; Aaron Kirchfeld in London at email@example.com; Adam Ewing in Stockholm at firstname.lastname@example.org