Telecoms equipment maker Ericsson said on Monday it expected the wireless business set to be acquired from Nortel to produce a double-digit operating margin this year.
Ericsson Chief Financial Officer Hans Vestberg also told a conference call that he saw the deal, expected to close in the third quarter, generating synergies in sales, services and research and development. When asked, Vestberg, who is due to become chief executive
at the turn of the year, agreed that the wireless acquisition could have an operating margin of above 10 percent this year.
The Swedish company said at the weekend it had won an auction to buy the wireless assets of Nortel Networks Corp in a $1.13 billion deal.
The company beat two other bidders -- its smaller rival Nokia Siemens Networks NSN.UL and private equity firm MatlinPatterson.
Ericsson said in a statement that it expected the transaction to have a positive effect on its earnings within a year of the closing the deal.
Canadian BlackBerry maker Research In Motion (RIM) was also chasing a deal for the Nortel technology but has said that Nortel effectively blocked its approach, valued at $1.1 billion.
Nortel said RIM had refused to comply with confidentiality provisions that other bidders had agreed to follow.
RIM is expected to use a bankruptcy court hearing for Nortel on Tuesday to voice its objections about the bidding process.
Ericsson's Vesterberg acknowledged that there were still some issues to be resolved on the acquisition.
On the RIM claims, of course there are some regulatory issues still left to be defined, Ericsson's Vestberg said.
However, as we can see it right now, and as we are press releasing this, we feel confident that this (deal) will all go through but we still have a lot of respect for the process that will come.
In the acquisition, Ericsson will get Nortel's businesses in the CDMA wireless technology used in North America and in the new long term evolution (LTE) high-speed wireless technology that many of the world's biggest operators plan to use to upgrade their telecommunications networks, as well as some patents.
Vestberg said operators were likely to continue to invest in CDMA equipment for some time before making the switch into the higher-capacity LTE technology.
Our initial contacts and the feeling that we got from our teams and the discussions we have had is that they will continue to invest in CDMA for a couple of years more, and then of course (there is) maintenance, he said.
(Additional reporting by Wojtek Dabrowski in Toronto; editing by Greg Mahlich and Karen Foster)