Nokia Share Price: Handset Maker to Pay €1.7 Billion for Siemens’ Stake in JV
iNVEZZ.com, Monday, July 1st: Nokia (HEL:NOK1V) will pay €1.7 billion to take full control of Nokia Siemens Networks, its network equipment joint venture with Siemens AG. Nokia will pay €1.2 billion for the 50 percent stake of Siemens, with the remainder as a secured loan from Siemens due a year after the completion of the deal, the companies said in a statement on Monday.
With this move, the struggling Finnish handset maker is gaining control of a profitable business at a lower-than-expected price, according to analysts. The Nokia share price rose sharply in Helsinki following the announcement, and was up 7.10 percent at €3.05 as of 9:35 GMT.
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**Stabilising move**
Nokia, once the world’s biggest handset manufacturer, has struggled to keep up with mobile phone rivals in recent years, in part due to key underestimation of important trends in the industry. The company has been slow to adapt to the shift towards smartphones, which has been particularly damaging to its position on the mobile market and has resulted in Nokia ceding market share to rivals such as Apple Inc. and Samsung Electronics Co.
But with the deal for NSN Nokia will probably be able to mitigate losses in mobiles. The joint venture managed to return to profitability in the second quarter of 2012 after a large-scale cost-saving effort.
“With this transaction, Nokia buys itself a future, whatever happens in smartphones and feature phones,” said Pierre Ferragu, an analyst at Sanford C. Bernstein in London, as quoted by Bloomberg. “Nokia Siemens has a future in the network equipment world, with a streamlined operation and a No. 2 position in a now concentrated and stable market.”
At the same time, the purchase on NSN will make a takeover bid for Nokia from a larger peer less likely, according to Hannu Rauhala, a Helsinki-based analyst at Pohjola Bank. “If someone manufactures mobile phones and consumer electronics, now they have to buy NSN too,” Rauhala said, as quoted by the newswire.
Rauhala puts the valuation of the network equipment venture at €5 billion, above the €3.4 billion valuation suggested by the price of today’s transaction.
**Net cash position**
!m[Nokia Stock Jumps More Than Seven Percent in Helsinki ](/uploads/story/3539/thumbs/pic1_inline.png)
Nokia posted in April its weakest quarterly revenue in 13 years. Sales of basic phones were down 20 percent in the first quarter, hurt by Asian handset makers building phones powered by Google Inc.’s Android operating system.
Nokia said today that it estimated its net cash position at €3.7-4.2 billion, down from €4.5 billion at the end of March.
**The Nokia share price was €3.06 as of 10.38 GMT, 01.07.2013**
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