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Update Nokia (NOK)
07/19/2010 5:27 pm EST
Only not quite as exciting and with decidedly more side effects.
But while stocks aren’t going anywhere lately, some companies are. And it’s important to track which companies are taking steps now to make themselves stronger for the next spurt of growth in the global economy and which companies seem immobilized by current tough conditions.
I’d put Nokia (NOK) in the first group. Oh, the company hasn’t managed to solve its iPhone or Blackberry problems. Nokia’s smartphones are still the laggards in the U.S. market.
But the company does seem, finally, to understand that it’s long-term business suicide for the world’s largest cell phone company to be an afterthought in the U.S. market. Business 101 says that you don’t let competitors have a big and profitable market to themselves so they can use profits from that market to attack your core markets.
I’d call Nokia’s move ground work that builds a foundation for Nokia to play a bigger role in the U.S. market. Sometime in the future when the company has a competitive smartphone model.
Nokia’s joint venture with Siemens (SI), the joint venture is world’s second largest maker of wireless phone network equipment (not the phones themselves but the gear that runs the network), will acquire Motorola’s wireless network business. (Again, not Motorola’s phone business but the unit that builds network gear.) Nokia Siemens will pay Motorola $1.2 billion in cash.
Acquiring Motorola’s network gear business, #4 in the world, will give Nokia Siemens more scale globally to compete with Ericsson (ERIC), #1 in the world and Huawei Technologies, roughly even with Nokia Siemens. But more importantly the deal will give Nokia Siemens a big boost in the North American market.
Nokia Siemens has competed at a disadvantage in North America since its network gear is based on the GSM standard used pretty much everywhere in the world except for the United States and by some East Asian carriers. Motorola sells both GSM and the CDMA gear used by such U.S. cellular operators as Verizon (VZ) and Sprint Nextel (S).
The deal will also add to Nokia Siemens’ position in fourth-generation technologies such as LTE and WiMax that are being built out by Verizon and Sprint Nextel.
As a result of the acquisition Nokia Siemens should pick up business from Verizon, Sprint Nextel, Vodafone Group (VOD), Japan’s KDDI, and China Mobile.
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