This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Looking At Nokia's Options After Siemens

NEW YORK ( TheStreet) -- On Monday, I talked about Nokia's (NOK - Get Report) recent decision to buy the 50% portion it did not already own from its joint venture with Siemens (SI).

Nokia has offered Siemens of 1.7 billion euro ($2.22 billion) for Siemens' 50% stake in their joint venture called Nokia Siemens Network. Pending regulatory approval, the deal is expected to close in this year's third quarter. Nokia will own 100% of the business, which is expected to take on a new name.

Before we continue, allow me to address a point: There are now reports suggesting that Nokia's 1.7 billion euro offer to Siemens is actually under what would be fair market value for the NSN business. Nokia is perceived to be taking advantage of its partner. I disagree.

As I pointed out recently, this deal was not a surprise. It was just a matter of time before it (or a deal similar) was announced, even though NSN had grown quickly to become a worthwhile threat to the services offered by Ericsson (ERIC) and Huawei. Siemens, which has been going through restructuring plans of its own, had made it known on more than one occasion that it wanted out of the partnership.

Because of the growth that NSN experienced over the past couple of years, Siemens anticipated there would be more interest from would-be buyers for its share of the business. The market didn't oblige. Given Cisco's (CSCO) recent shopping spree, Cisco's name was mentioned as an obligatory candidate. Cisco remained silent. Although Alcatel-Lucent (ALU) would have brought seamless synergies to NSN, it also would have been a colossal mistake, given ALU's own cost-cutting plans.

Complicating matters was the fact that the NSN business is coming off a pretty terrible quarter, during which NSN suffered a surprising 5% drop in first-quarter sales (reported in April), which also declined 30% sequentially.

Now, I'm just speculating here, but it wouldn't surprise me to know that customers developed some anxiety over Siemens' perceived lack of commitment to the NSN business.

Consequently, during these past three months no one stepped up to offer Siemens a better deal. Surprisingly, neither Ericsson nor Huawei showed any interest, either. So without any leverage, Siemens had no choice but to accept Nokia's offer on the basis of Siemens' own miscalculation and public statements.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
NOK $8.08 0.87%
AAPL $129.08 0.48%
FB $79.74 0.98%
GOOG $571.00 2.30%
TSLA $197.27 -3.00%

Markets

DOW 18,288.63 +155.93 0.86%
S&P 500 2,116.91 +12.41 0.59%
NASDAQ 5,007.17 +43.6430 0.88%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs