Nokia takes over Nokia Siemens networks for 1.7B Euro. Admits it burned through 300 to 800M Euros in Q2
Nokia has decided to buy out the 50% Siemens stake in Nokia Siemens networks, and take over the company completely, paying 1.7 Euro in cash for it.
Except for taking full control of Nokia Siemens Networks, Nokia does not plan many changes in the networking unit. They will keep it as an independent company for now, will retain the key management team, and will use the same headquarters in Espoo and facilities in Munich as before.
The buyout itself is an interesting and surprising development. Especially since Nokia decided to drop 1.7 billion Euro in cash for Siemens stake, from its dwindling cash reserves.
And those cash reserves are dwindling. We’ll have to wait until July 20, when Nokia reports its Q2 results, to know the reason and exact amount, but in the press release they admitted they have burned through from 300 to 800 million Euros of cash in April-June quarter. Nokia had 4.5B Euro net cash at the end of Q1, and they estimate that at the end of Q2 they’ll only have 3.7 to 4.2B Euro net cash left.
There may be a totally innocent reason for the decline in Nokia cash reserves in Q2. We’ll have to wait and see. But so far it does not look to good. And with current Nokia cash burn rate, to go and spend 40% of reserves on this unnecessary acquisition, it looks dangerous.
I am pretty sure Nokia board considered the deal’s impact on Nokia’s cash reserves. And they may have a clear plan going forward. Maybe they will turn around and sell the networking unit to some higher bidder. Or, maybe, Nokia Lumias and/or Ashas already started getting traction, and sustained profitability period is just around the corner. (I really hope so)
Whatever the plan for this Nokia acquisition is, I hope it works better than other Nokia plans over the last few years.