UPDATE 4-Nokia Siemens buys Motorola network ops for $1.2 bln

* Takes No 2 position in mobile gear market

* Deal is 0.32 times rev vs 0.57 for Nortel unit sales

* To take over 7,500 staff

* Motorola shares up 3.47 pct, Nokia shares up 0.8 pct
(Adds analyst comments, Motorola details, share prices)

By Tarmo Virki, European technology correspondent

HELSINKI, July 19 (BestGrowthStock) – Nokia Siemens Networks will
buy Motorola’s telecom network equipment business for $1.2
billion, in an effort to add mew customers in markets such as
Japan and North America where it has been seeking growth.

The idea is that a bigger Nokia Siemens Networks — a
venture of Nokia (NOK1V.HE: ) and Siemens (SIEGn.DE: ) — would
compete better than either company could have alone against
rivals Sweden’s Ericsson (ERICb.ST: ), China’s Huawei [HWT.UL]
and France’s Alcatel-Lucent (ALUA.PA: ).

Motorola and NSN have had a hard time battling bigger
players to win business with large telephone companies in the
cut-throat mobile gear market, which is expected by analysts to
decline this year.

RBC Capital analyst Mark Sue said while the sale price was
much lower than his expectation for a $2 billion to $3 billion
deal, it still made sense for Motorola to sell the assets.

“It’s one of those things they had to do. They’re too small
to have a serious impact on the carrier market and it’s a
declining business longer term,” he said.

Motorola shares were up 26 cents or 3.47 percent at $7.76
in afternoon trading on the New York Stock Exchange where
Nokia’s US shares were up 7 cents, or 0.8 percent.

After the deal, which is expected to close later this year,
Motorola plans to split into two entities, one of which will
include its mobile phone and set-top box business. The other
business, which was previously to include network equipment,
will now focus entirely on selling wireless technology to
companies and clients such as public safety organizations.

Under the deal, Motorola, which brought in $3.7 billion
revenue from network equipment last year, will still keep its
network technology patents, which Nokia Siemens can use through
a cross-licensing agreement.

Motorola will also keep its i-Den network gear business
that supports an older Sprint Nextel (S.N: ) network and brought
in roughly $400 million of its 2009 network revenue.

Nokia Siemens and Motorola said they were also exploring a
relationship between Motorola’s public safety business and
NSN’s commercial business that sells next generation technology
Long-Term Evolution.

Nokia Siemens Networks said it expects the deal to give it
relationships with more than 50 telecom operators and to
strengthen its position with major carriers like China Mobile,
Clearwire, KDDI, Sprint, Verizon Wireless and Vodafone.

Nokia Siemens Networks, which plans to finance the deal
from its existing reserves and financing agreements, has
struggled to make a profit in the $82 billion market, which was
hit hard by the recession.

But under Chief Executive Rajeev Suri the group has started
to seek growth more aggressively and fight back against market
leader Ericsson and Huawei, its most aggressive competitors.

Motorola’s mobile network business controls just 3 percent
of the global market, but it is a market leader in high-speed
technology WiMax, and has a strong footprint in CDMA
technology, which is used in the United States.

“The acquisition is timely given Nokia Siemens’ ambition to
grow its revenues in North America,” said Paolo Pescatore, an
analyst with British consultancy CCS Insight.

This deal makes Nokia Siemens the third-largest player in
North America after Ericsson and Alcatel-Lucent.

Nokia Siemens tried to build a position in North America
through an acquisition last year, but lost out on two major
auctions of assets from bankrupt Canadian rival Nortel: first
to Ericsson and then to Ciena Corp (CIEN.O: ).

Both companies paid 0.57 times annual revenues for the
Nortel business units. Nokia Siemens is paying 0.32 times
annual revenues of $3.7 billion at the acquired Motorola
business.

SHRINKING MARKET

Some analysts questioned the deal due to Motorola’s tiny 3
percent global market share and due to tricky integration of
7,500 Motorola staff and multiple product lines.

“It is a desperate attempt to gain market share in the U.S.
after the twice failed attempts to buy Nortel’s CDMA and Metro
Ethernet businesses,” said Earl Lum, founder and chief of
industry research company EJL Wireless.

“The integration of the personnel and the manufacturing
facilities and supply chain will prove to be challenging in
addition to the differences in corporate cultures,” he said.

Nokia Siemens has struggled to take a larger share of North
American business on its own. Revenues shrank 9 percent in the
first quarter to 153 million euros ($198.5 million), making up
just 6 percent of the group total.

In contrast, Ericsson generated revenue of 9.5 billion
Swedish crowns ($1.3 billion) in North America the same
quarter, 21 percent of the group total, helped by its Nortel
asset buy.

Market research firm Gartner predicts the overall market
will shrink 2 percent this year after a 7 percent fall in 2009,
and even the most optimistic industry players see only slight
growth ahead.

Smaller vendors, like Motorola, have already focused on
picking a limited number of deals and technologies they can
succeed in — especially after Canada’s Nortel filed for
bankruptcy last year. [ID:nLDE66I13V]

Barclays Capital advised Nokia Siemens and Centerview
Partners, JP Morgan Chase & Co. and Goldman Sachs Group advised
Motorola.
($1=7.334 SWEDISH CROWN)
($1=.7706 EURO)

Stock Market Advice

(Additional reporting by Brett Young and Terhi Kinnunen in
Helsinki, Georgina Prodhan in London and Sinead Carew in New
York; Editing by Samia Nakhoul and Gunna Dickson)

UPDATE 4-Nokia Siemens buys Motorola network ops for $1.2 bln