Nokia Siemens Networks is set to sell its microwave
transport business toDragonWave in a deal potentially worth up to EUR 110
million.
The deal would be a major relief for the telecom equipment
major who is looking for cash resources to cope up with pressure from
competition.
Nokia group’s net cash from operating activities was EUR 176
million in Q2 2011 as compared with EUR 944 million in Q2 2010.
The deal will include Nokia Siemens Networks’ microwave
transport business, including its associated operational support systems (OSS)
and related support functions.
As part of the deal, DragonWave will become the preferred,
strategic supplier to Nokia Siemens Networks of packet microwave and related
products. They will also jointly undertake technology development activities.
Through this strategic relationship, customers would
continue to receive high-quality services and sales support from Nokia Siemens
Networks, while DragonWave’s best of breed products would ensure they have
access to industry leading technology,” said Marc Rouanne, head of Network
Systems, Nokia Siemens Networks.
DragonWave’s revenue
for the second quarter of fiscal year 2012 was $13.6 million, compared with
$27.2 million in the second quarter of fiscal year 2011. Cash, cash
equivalents, restricted cash, and short-term investments totaled $71.6 million.
DragonWave is very proud to partner with Nokia Siemens
Networks. We hope to welcome new employees as a valuable addition to the
DragonWave team,” said Peter Allen, president and chief executive officer
of DragonWave.
DragonWave expects to finance the transaction through a
combination of cash on its balance sheet and increased debt facilities provided
by Comerica Bank and Export Development Canada.
The deal will strengthen DragonWave’s product presence in
major mobile operators throughout the world through Nokia Siemens Networks’
extensive global sales channel.
As part of the proposed acquisition, the companies expect
approximately 360 Nokia Siemens Networks employees, based in Milan, Italy and
Shanghai, China, to transfer to DragonWave.
The sale of the microwave transport business is happening at
a time when Nokia Siemens Networks failed to attract a private fund to inject
funds.
Recently,
phone major Nokia and Siemens, parent companies of Nokia Siemens Networks,
announced that they will provide capital of EUR 1 billion to NSN.
The fund infusion of EUR 1 billion was aimed at
strengthening the company’s financial position and set the stage for strategic
flexibility, productivity and innovation in areas such as mobile broadband and
related services.
The sale of the microwave transport business to DragonWave
is important as the company’s Chinese competition – Huawei and ZTE – are
aggressively growing their business.
The decrease in Nokia’s net cash from operating activities
in the second quarter 2011 was due to negative net working capital impacts
mainly driven by lower net sales and an unfavorable geographic mix, as well as
lower underlying profitability.
Net cash and other liquid assets decreased also due to cash
outflow related to the acquisition of Motorola’s networks assets that was
financed mainly by an increase in short-term interest bearing liabilities.
Nokia Siemens Networks posted 16
percent increase in net sales at EUR 3,413 million in Q3 2011 as compared with
EUR 2,943 million in Q3 2010.
By Baburajan K
