(updates with details on Siemens strategy)
MUNICH (AFX) - Siemens AG and Nokia Corp announced they have agreed to merge their telecom networks units, creating a joint venture company with 15.8 bln eur in annual sales.
The 50:50-owned Nokia Siemens Networks is expected to generate cost savings of 1.5 bln eur annually by 2010, including staff reductions of 10-15 pct from the current combined workforce total of 60,000.
However, Siemens said separately that it will face restructuring costs of 1.5 bln eur by 2010 as a result of the merger.
The deal is expected to close on Jan 1.
Assuming that closing date, both Nokia and Siemens expect the impact of the partnership to be EPS-accretive on a pro forma basis and excluding restructuring charges by end-2007.
'The joint venture is an important step to strengthen our position in the market sustainably and to enable us to offer the best ... converged technologies and services to our customers,' Siemens chief executive Klaus Kleinfeld said in a statement.
The venture will be based in Helsinki and its results will be consolidated by Nokia and accounted for as equity by Siemens.
Simon Beresford-Wylie, currently a Nokia vice president, will become chief executive of the merged company.
Siemens had long been formulating an exit strategy from the telecom networks business, which faces intense competition from Nokia, the recently merged Alcatel SA/Lucent and several North American and Asian manufacturers.
Last fiscal year Siemens' Communications (COM) unit achieved an operating profit of 454 mln eur on sales of 13.141 bln eur. The operating profit figure was 36 pct lower than 2004's 707 mln eur total as a result of hefty restructuring charges.
Siemens will retain the COM unit's wireless modules business and integrate it into its Automation and Drives unit.
In addition, the conglomerate will continue to seek partners for COM's enterprises business.
Siemens did not provide any financial details relating to these smaller operations' overall performance. alfred.kueppers@afxnews.com amk/vs//vs/amk/jms/amk/jms COPYRIGHT Copyright AFX News Limited 2005. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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