Nokia takes full control over its best performing business

Nokia is buying its best performing business as raising concerns amid investors of companys balance sheet stability. The Finnish firm is acquiring Siemens after both companies took part in a joint venture, in order to introduce stability to its own struggling group of businesses.

The venture called Nokia Siemens Networks (NSN) failed to be bought 2 years ago. Now the loss making Nokia is gaining full control at what analyst define as “cheaper than expected price”. However, the acquisition could bring uncertainty to the Finnish firm already giving signals of instability in its balance sheet. In contrast to Nokias smartphone business, NSN turned profitable in the second quarter of last year after its on fourth-generation Long Term Evolution (LTE) networks began to pay off.

According to Financial Times the deal is to be worth 1.7 billion euros which is around $2.2 billion. Nokia said it will pay Siemens 1.2 billion euros after the deal is sealed. The remaining half billion euros would be paid through a loan from Siemens.

Pierre Ferragu, an analyst at Bernstein Research, said for Financial Times: “This is a negative because we recently showed Nokia’s balance sheet isnt as strong as it appears at first sight [and] from that perspective the acquisition of Nokia Siemens in full is a further stretch.”

Nokia said it expected to close the transaction, during the third quarter of this year. The Finnish smartphone manufactureralso said it estimated its net cash position was 3.7-4.2 billion euros. Company explained that if the NSN deal had closed in the second quarter, its net cash position would have been 2.0-2.5 billion euros.

After the acquisition the Siemens name would drop from Nokia Siemens Networks (NSN). Company said it would keep headquarters and management teams in Finland as it will continue to operate at the German market.

Nokia shares declined by 1.84% on Friday closing of market. However company is up by 6.42% on a year to date basis.