By Gabriel Perna: Subscribe to Gabriel's RSS feed
July 19, 2010 6:14 PM EDT
Nokia Siemens Networks acquired Motorola's wireless network infrastructure assets for $1.2 billion in cash, in a move that left many analysts saying "It's about time."
In a competitive industry, where there are only a small number of dominant players, analysts said getting out for a reasonable price was a good move by Motorola.
"For Motorola, it's pretty simple. They were sub-scale. They didn't have much of a 3G presence and the move to 4G would have been challenging... To get 60 cents for the dollar in cash for the division, that's a good development," said Mark McKechnie, analyst at Gleacher & Company. "Now they are much tighter."
As the company moves towards a spin off where it will divide into Motorola Mobility and Motorola Solutions, focusing on core, successful assets will be essential to its success, he said.
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For Nokia, the acquisition offers a bigger international footprint and more customers. As part of the deal, Nokia gains access to all of Motorola's current wireless network infrastructure relationships including those with China Mobile, Clearwire, Verizon Wireless and Vodafone.
"In our view, that customer base is perhaps the largest asset that Nokia-Siemens will garner from the transaction with its technology falling to a second or third consideration. While Motorola's infrastructure business has its strong points -- 41 WiMAX contracts in 21 countries, 30 active CDMA networks in 22 countries- - its position in WCDMA and LTE trails that of other players (Ericsson, Alcatel Lucent, Huawei)," said Chris Versace, analyst at Think 20/20 LLC, in a research note.
Along with the customers, it will take on 7,500 former Motorola employees including those who work in large research and development sites in the United States, China and India. Motorola will retain its iDEN business which powers the "push to talk" seen on Sprint phones.
Versace did say while the move was a good one for Nokia, said there are still long-term concerns for the company has in competing with the other major players in the industry.
"The combination of having to integrate the Motorola business into Nokia-Siemens while competing in a market whose customer base is shrinking is challenging enough. Add to this the cost differential between firms based in North America and Europe versus those in China and in our view, acquiring the Motorola business does not address the long term challenges that await Nokia-Siemens," Versace said.
The deal is set to close at the end of 2010.
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