Frankfurt/Munich, Oct. 2 (Reuters): Siemens confirmed on Tuesday that it was in talks with US network equipment maker Motorola Inc. about possible co-operation, though industry sources said a deal was not imminent.
Speaking to reporters in Munich on the sidelines of a technology conference, Siemens board member Volker Jung, head of the Siemens division which groups mobile and fixed line telecoms, told reporters: “We have been talking to Motorola for a while ... we are also talking with a series of other firms.”
His comments came after a weekend report on Crain’s Chicago Business Web site that Siemens and Motorola were close to a deal which would see the German firm swap its mobile handset unit with Motorola’s wireless network unit.
It said Siemens was asking for an unspecified cash payment along with the swap. Both businesses generate over $ 4 billion annually in revenue, though the Motorola unit is loss-making.
Industry sources said any deal was still months away as the two sides disagree on the valuation of the US giant’s wireless infrastructure business. The unit posted a loss of $ 1.4 billion in 2001. They said Siemens, not to limit its options, was also talking to other mobile infrastructure makers, which could see tie-ups with Sweden’s Ericsson or South Korea’s Samsung.
Ericsson, the number one wireless network maker ahead of Nokia, issued a third quarter sales warning on Monday, which led investment banks UBS Warburg and Morgan Stanley to cut their target prices on it shares on Tuesday.
Moves toward consolidation have been accelerated by weak demand in the wireless network sector, which is widely seen falling this year and next amid a lack of spending by debt ridden operators. In 2004 the market is seen picking up.
Consolidation would help players cut costs and gain market share, making them ready for an upturn when it comes. New third generation cellphones and services are seen boosting the sector. Siemens said in July that it was looking to become the number two in the mobile infrastructure market after reaching third position in the first half of 2002 from sixth position a year earlier. It raised its market share to 13 from 11 per cent.
Industry sources said the Siemens group, which turned around a loss-making power generation business in time for a boom in US gas turbines, was aiming to do the same in mobile networks.
Consumer products like handsets are seen as peripheral to its main strengths as a systems and infrastructure player.