Original URL: http://www.theregister.co.uk/2005/05/10/siemens_korea/

Is Siemens phone biz Korea bound?

Watch Pantech, say sources...

By Guy Kewney

Posted in Financial News, 10th May 2005 13:44 GMT

A report in Korea Economic Daily says that Pantech "has received a proposal" to buy the mobile division of Siemens. Is it for sale? - yes, according to most observers. But why won't anybody buy it?

The company is not, on the face of it, a tempting deal. Siemens has been making, but barely selling, mobile phones since the first GSM cellphones appeared on the market. But what all rival phone makers fear, is a new, aggressive player in this market, acquiring all the intellectual property that Siemens owns. Pantech looks like that bumptious brat.

Commentator Peter Rojas says: "Pantech is completely determined to be a baller in the global cellphone market and want to be in the top 5 by 2007 - much to the annoyance of peninsular rivals Samsung and LG."

Siemens itself has said it wants to "spin off" the mobile division. But there have been several rumours, which have proved incorrect.

The very idea of the sell-off itself was denied by Siemens back in January 20, when the German paper, Die Welt, reported a definitive "we aren't selling" statement from director Ralph Heckman, in response to questions about a sale to Korean phone company LG.

Previous to that, Chinese firm Ningbo Bird had been linked with the sell-off, only for the authorities to deny even having had talks.

But eventually, Siemens admitted it was getting rid of the mobile division. A report back on 24 April in Electronic Times quoted Siemens CEO Klaus Kleinfeld. Kleinfeld, who "announced the transformation of the mobile device division into an independent company during a press briefing in Portugal," said the magazine. It said Siemens wanted to find a partner, but was required by law to maintain current employment levels.

Several large corporations have shown interest. Sueddeutsche Zeitung reported that Acer was in discussions; and Channel News Asia added Nortel to the list of names. Motorola's name came up in a report from Frankfurt Allgemeine Zeitung on 3 May. The paper said that talks had been under way, but Motorola was pulling out.

Observers said that Motorola would want the business, but was not happy with having to comply with German employment terms - keeping the Siemens workforce on was not attractive to the Chicago company. Even so, the deal was close to being signed when it fell through.

The Pantech deal is exactly the sort of thing all phone makers will have been dreading. Underlying the GSM business was a frantic round of "patent circumvention" when a group of technologists formed the International Telecommunications Standards User Group or ITSUG to devise the TDMA standards for GSM, and shared the patent rights amongst themselves.

Since then, most mobile makers have had bad patches, and several have seriously considered pulling out of the business. Examples include Ericsson, who sold their GSM business to Sony as part of a joint venture, and Motorola, which came dangerously close to giving up, but eventually decided to invest.

Nobody outside ITSUG knows exactly what the terms and conditions of IP ownership inside the group are; to speak of the mere existence of the group is forbidden by the terms and conditions of membership. But Sony Ericsson shows that there are ways of passing on the IP ownership, and so the existing builders of phones will definitely not want to see all the Siemens technology pass into the hands of another, especially not an outsider.

That's the main reason why several people have seriously considered buying the company - even though it's going to cost more than it can be worth. Siemens as a going concern, isn't attractive. Siemens as an IP owner, however, could be a gold-mine.

© NewsWireless.Net

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