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Nokia Siemens Networks sells optical business to Marlin Equity Partners

Unit becomes privately-owned optical provider
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Nokia Siemens Networks on Monday reached an agreement to sell its Optical Networks business to Marlin Equity Partners, establishing the unit as an independent company in the evolving optical market segment.

Herbert Merz, Nokia Siemens Networks

Merz (Image source: NSN)

Similar to its sale of its access network division to ADTRAN (Nasdaq: ADTN) last December, divesting its optical unit is part of the Finland-based company's move to broaden its mobile broadband focus.

Marlin Equity Partners has created a new company that plans to further the unit's standing in the optical sector while leveraging its $1 billion of capital under management "to act as a consolidator."

Apart from a new name and owner, the look and feel of the new company will remain the same. With headquarters in Munich, the company will be led by its existing management team with Herbert Merz, who was head of optical networks for Nokia Siemens Networks, nominated as its CEO.

Merz said in the release announcing the sale that "[t]his transaction is very exciting for the business as it will give us the opportunity to build a long-term leader in optical and the strategic flexibility to be proactive in the market."

All of the 1,900 optical business unit employees--the majority of which are located in Germany, Portugal and China--will be transferred to the new company, as will all of the related customer contracts.

Once the purchase meets all of the customary closing conditions, including antitrust clearance procedures, Marlin and NSN expect it to be completed in Q1 2013.

NSN has found growing utility, especially in the 100G market, with customers such as XO Communications and TeliaSonera.

Some analysts believe the sale, which makes sense as it does not provide much of a connection to the company's mobile broadband focus, comes at a time when NSN has fallen behind the competition in the optical race.

"NSN's optical business has been slipping for years with no clear plan to improve; it has not done the kind of fundamental R&D that its main competitors (e.g., Alcatel-Lucent (NYSE: ALU), Ciena (Nasdaq: CIEN), Cisco Systems (Nasdaq: CSCO), and Huawei Technologies) are doing," said Dana Cooperson, leader of Ovum's Network Infrastructure Telecoms practice.

Cooperson added that there's a number possible outcomes from the sale: Competitors will try to use it as a pawn to win over NSN's customers or Marlin could sell the unit altogether to another vendor.   

"The details of the transaction were not released, so it is difficult to gauge Marlin's commitment to turning the optical business around," she said. "Competition in the market is keen; margins are under constant pressure. Competitors will take advantage of this ownership change and related confusion to gain any advantage in NSN's accounts. Marlin's goal may be to sell the optical business to another vendor, for example Juniper Networks."

For more:
- see the release

Special report: The most important M&As of 2011

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