The best evidence that the joint venture has been a failure is a series of layoffs it made in 2012, which totaled about 20% of its workforce.
The decision will only serve to distract the attention of Nokia’s management, which should be on a turnaround of its handset business. This business is one it apparently has tried to dump on Microsoft Corp. (NASDAQ: MSFT), which supplies Windows 8 mobile operating systems for Nokia phones. Microsoft believed enough in the model that it invested about $1 billion in late 2011 or early 2012 to help the efforts of Nokia to promote Windows-based hand sets. Microsoft apparently did not believe enough in the fruits of the relationship to buy Nokia out.
Perhaps Nokia has decided to do the Siemens deal because it has entirely lost faith in its handset business, which was until recently the largest one in the world. Samsung took that position last year. Nokia’s efforts to enter the high-end smartphone sector have been overwhelmed by the wide successes of Apple Inc. (NASDAQ: AAPL) and Samsung products, which gives Nokia very few places to turn.
What does that leave investors to believe when they look at Nokia’s plans? Has it taken a poor position in the telecom manufacturing business, which could capitalize on the global wireless subscriber company rush to 4G? If so, it has gotten itself into a sector that is as competitive as the handset business is. The competition includes China-based Huawei Technologies, Ericsson and troubled Alcatel-Lucent S.A. (NYSE: ALU).
So, Nokia’s management efforts are spread against two brutally competitive industries, when that management has shown no signs that it can do well in either.
See the full text of the announcement.
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