Nokia-Siemens fail to impress investors

According to The Wall Street Journal, Nokia Corporation and Siemens AG have been unable to convince a consortium of investors to buy a major stake in their unsuccessful joint venture, the Nokia Siemens Networks. The companies hoped that the investors would bear the burden of pumping more money into the project; however it now seems that the companies will have to bear the mammoth task of investing more funds themselves.

Nokia and Siemens had approached a syndicate of investors which included private equity firms Platinum Equity LLC and Gore Group LLC, but talks are expected to reach a dead end. Nokia Siemens Network is the world’s second largest maker of wireless communication gadget. The collaboration occurred in 2007 between the Finnish giant Nokia and the German company Siemens in a six year deal. The company had earlier hoped to reach double digit growth figures, but has struggled to make any profit.

Earl Lum, chief of EJL Wireless, a telecom gear industry research firm, attributed this failure to the suspect future of the network. He remarked that any potential investor wishes to see if there is any light at the end of the tunnel, more specifically, profitability with Nokia Siemens Network. The company has recorded profits in only two of its financial quarters since 2007, making the investors uneasy with the current evaluation of what Nokia and Siemens desire of the Network. It then comes as no surprise that the investors are discouraged from spending money in a losing cause.

Nokia and Siemens have a 50:50 ownership in the venture, but Nokia holds an edge in the decision making with its officials on four out of seven seats on the board of chairmen. The Nokia Siemens Network has lost over $1 billion in the last financial year. Nokia had hoped that selling majority of the stakes to the investors would help the company in reducing the deficit on its financials, Wall Street Journal reported. It also reported that Siemens is disappointed with Nokia’s inability to chalk up a good strategy and haul the network back on its feet. The former may take control of Nokia Siemens network.

Nokia had announced earlier this month that it was in process of talks with multiple parties regarding stakes of Nokia Siemens Network. Equity firms like KKR and TPG are still in the process of finalising a deal which would involve selling of small stakes in the Network.