The US equipment manufacturer Motorola and its German competitor Siemens are reportedly considering a swap deal which would see Motorola divest its wireless network business in return for Siemens’ mobile handset operations. It is thought that the two vendors have been in negotiations for more than a year. Neither company has commented on the latest reports.
According to Chicago Business, Siemens is asking Motorola for an unspecified cash payment as part of the deal, which involves businesses that generate over USD 4 billion in revenues annually. For its part, Motorola is hoping to retain its equipment supply deal with US cellular operator Nextel, in which Motorola owns a 13.5% stake. Nextel’s networks use the proprietary iDEN technology so would be relatively easy to separate from Motorola’s other wireless network operations.Written by BWCS for PMN Mobile Industry Intelligence.
PMN has been predicting consolidation among manufacturers for some time. The proposed ‘handsets for networks’ swap would make good commercial sense for Siemens and Motorola. They are already working together on 3G handsets and both are Symbian shareholders and licensees. It would be an opportunity for Siemens to offload a sub-scale handset business and gain a stronger position in networks. Likewise, Motorola would divest a loss-making infrastructure operation and boost its position in handsets.
Motorola has made good progress with its handsets business over the last twelve months, returning the operation to profitability and gaining market share. However, Samsung could soon challenge it for the number two position and it still lacks strength in Europe.
If Siemens and Motorola were to make a successful deal, it could prompt further consolidation. What about Samsung merging its handset operations with Sony Ericsson, or Nokia buying Alcatel’s networks business? With valuations depressed across the industry, the next few months will present numerous opportunities for well-financed companies to position themselves for the upswing.
Originally published by PMN Mobile Industry Intelligence, the subscription-based analysis and insight platform founded by Marek Pawlowski.