Nortel, Siemens ponder partnership
report: Both companies look to boost global market share
Bert Hill
The Ottawa Citizen
Tuesday, April 26, 2005
Speculation is growing that Nortel Networks is talking to German industrial giant Siemens about new business combinations that would get telecommunications equipment sales moving again.
Fresh from deals with LG Electronics in Korea, Putian in China and smaller deals in India and the United States, Nortel is building a network of new industry partners in a bid to end a four-year slide in sales.
Der Spiegel, a German news weekly, said top Siemens and Nortel executives met recently in secret talks near a Munich airport. The magazine, quoting unidentified Siemens sources, said Siemens is considering product partnerships with Nortel or making an investment in Nortel in a bid to increase market share.
"We don't comment on rumour and speculation," Nortel spokeswoman Marion MacKenzie said yesterday.
Siemens also declined comment.
Siemens is a much bigger and well-established player in the telecommunications industry than LG Electronics, which only entered during the bubble.
Siemens has large wireless handset and networking equipment operations that generate about 20 per cent of sales -- the biggest division in the huge German conglomerate.
But the Siemens communications division has been a big, money-losing disappointment and new top management is under pressure to fix or sell the division.
It is doubtful Nortel would be interested in Siemens's wireless handset business -- it has lost market share and Nortel has no comparable products.
Another German publication, however, said Siemens is in advanced negotiations with Acer Inc. of Taiwan on the handset business.
Alcatel SA of Paris and Swedish giant Ericsson have also spun off handset businesses to Asian partners.
But a partnership on networking equipment could help Nortel to strengthen sales in Europe, Asia and other parts of the world, where Siemens has a substantial installed base and annual sales of about $8 billion U.S. -- only 20 per cent less than Nortel.
In a recent report, SG Research analyst Fabrice Theveneau said Siemens believes six of the eight networking divisions are performing well. It said Siemens's next-generation wireless networking sales have 15 per cent of the world market, trailing only Ericsson and Nokia. Nortel had about 10 per cent of the market in 2003, but is believed to have lost ground last year.
The report said Siemens has an 11-per-cent market share in the voice-over-Internet equipment market, compared with 25 per cent for Nortel.
However, older voice networking, optical and access equipment are money-losing disappointments that suck resources from profitable other divisions.
Nortel is facing the same problems as demand for traditional voice gear plunges around the world and demand for optical gear is sluggish and losing money. |
