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Technology Stocks : Siemens
SI 11.24-0.4%Nov 6 3:59 PM EST
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To: elmatador who started this subject9/30/2002 8:29:18 PM
From: elmatador  Read Replies (1) of 356
 
Lex: Motorola/Siemens

Published: September 30 2002 20:21 | Last Updated: September 30 2002 20:21

The technology sector - and wireless telecoms and handsets in particular - urgently requires consolidation. A transaction whereby Motorola swapped its wireless infrastructure business for Siemens' mobile handsets business would be a welcome sign of life. There is no evidence that a company needs a presence in infrastructure to be successful in handsets, or vice versa. Nokia specialises in handsets, accounting for 80 per cent of revenues. Ericsson has been more successful in infrastructure, which accounts for 80 per cent of revenues.

But quite apart from the uncertain outlook for networks, handsets and volatile equity markets, it is no surprise that talks should be dragging on. A transaction makes sense for Motorola. It would offload its loss-making network equipment business, consolidate its position as number two in global handsets (with 24 per cent market share including Siemens' 9 per cent) and significantly boost its European presence.

It is not so straightforward for Siemens. It would offload a third rate handsets business and acquire a US infrastructure presence. But Motorola's CDMA technology is a bad fit which would sit uneasily with Siemens' cost savings plans. Other than holding the assets for a later round of consolidation, it is not clear why it would want them. An industry structure where no provider has a market share much above 10 per cent, and where sales will decline 20 per cent this year, is not sustainable. A significant cash component would be needed to sweeten the deal for Siemens shareholders.
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