Siemens has been searching for years for a solution for its telecoms equipment unit Com, after offloading its loss-making mobile phones division to Taiwan's BenQ last year.
The Siemens Com unit made an operating profit of 454 million euros last fiscal year, or 3.5 percent of its sales of 13.1 billion euros. But Siemens will keep, for now, its Enterprise business which tailor-makes telecoms systems for firms, though it is actively pursuing a divestment.
Nokia's networks division had an operating margin of 13 percent last year and the joint venture will target a margin in "double digits" already in the first year.
PROFIT BOOST
Nokia and Siemens said they both expect to boost their earnings per share by the end of 2007 on a pro-forma basis excluding restructuring charges, which Beresford-Wylie said would total about 1.5 billion euros.
The firms expect cost synergies of 1.5 billion euros annually by 2010 and said they would cut 10 to 15 percent of the new business's combined workforce of 60,000 over four years.
"I like the idea but I think it's risky," said Nomura analyst Richard Windsor.
"On the wireless side Nokia is sub-scale and putting them together will help. But in wireline Nokia has no business whatsoever and it's now being tasked with turning around a business that Siemens failed to do over the last six years."
The deal will face review by competition and antitrust officials in Europe and the United States because of its size and the amount of business the parents do in those markets. But analysts and the companies said they did not expect any major difficulties with regulators.
Nokia executives have emphasised in recent months they are open to acquisitions as well as joint ventures to boost the company's position in various markets. But Nokia has shied away from major takeovers despite hefty cash reserves at 9 billion euros at the end of March.
Monday's deal echoes a joint venture the Finnish group agreed in February with Japanese electronics firm Sanyo Electric Co. to make handsets using the CDMA mobile standard.
Nokia Siemens Networks will have its headquarters in Finland, the base of Beresford-Wylie, who currently heads Nokia's networks division. It will also have a regional headquarters in the Siemens home city of Munich. Siemens official Peter Schoenhofer will be chief financial officer.
Nokia and Siemens will hold a conference call for analysts at 1300 GMT. (Additional reporting by Sinead Carew and Michael Flaherty in New York, Jennifer Tan in Singapore, Jens Hack in Munich, Lucas van Grinsven in Amsterdam and Rex Merrifield in Helsinki)
By: Georgina Prodhan and Tarmo Virki
Copyright 2006 Reuters. Click for Restrictions
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