Siemens Enterprise Communications Finds a Partner

Siemens has decided on a partner for its enterprise communications business. The Gores Group, an American investor, will acquire a 51% stake in Siemens Enterprise Communications.

“We have been looking for an opportunity to expand our presence in the enterprise networking and communications space and this partnership with Siemens provides the perfect fit,” noted Alec Gores, founder and chairman of Gores.

Siemens will retain a stake of 49%. ”We are continuing to intensify the focus of our portfolio on the three Sectors, which are Energy, Industry and Healthcare. In Gores, we have found an extremely experienced technology and telecommunications partner, who strengthens the business with the contribution of the two assets Enterasys and SER Solutions. We are confident, that this will benefit the employees and customers in the long term. As announced already in February, the transferred business will be solidly financed,” stated Joe Kaeser, Siemens CFO.

The reorganisation of Siemens Enterprise Communications, previously announced by Siemens, has made significant progress, ensuring a clean start for the joint venture. The deal of the joint venture is expected to be closed at the end of Siemens fiscal year 2008, pending regulatory approval.

Gores and Siemens plan to invest approximately €350 million in the joint venture – not including expenditures for research and development and other expenditures as part of the ordinary course of business. The investments will be made in order to launch innovative Siemens Enterprise Communications products on the market, acquire other technology platforms to capitalize on the powerful Siemens Enterprise Communications distribution organization and further drive the expansion and transition of the business from a hardware supplier to a software and service provider.

Gores, which is focused to grow businesses, has extensive management expertise in the technology and telecommunications area and has rapidly restructured businesses undergoing fundamental structural changes and established them as successful independent companies or successfully consolidated them with other companies in its portfolio. Gores has an extensive expertise in Europe as well, where they made several investments in the past few years.

When the joint venture is launched, Siemens Enterprise Communications business will also be supplemented and strengthened by combining the business with two of Gores’ current portfolio companies – Enterasys, a network equipment and security solutions provider and SER Solutions, a call center software company. “Combining the three companies will lead to a more complete enterprise networking and communications offering that will leverage Siemens Enterprise Communications powerful distribution capabilities, global reach and extensive customer base,” stated Alec Gores.

With its investment of approximately €175 million, which represents half of the total amount of the planned investment of approximately €350 million, Siemens helps Siemens Enterprise Communications to grow. By creating a solid capitalization and further transaction costs as well as liabilities of Siemens Enterprise Communications, there will be a substantial financial impact in the fourth quarter of Siemens fiscal 2008.

On an operational level, business will be driven by Gores. The joint venture will be entitled to continue using the Siemens brand. Key patents and licenses will be transferred to the joint venture.

Production facilities in Leipzig, Germany, and Curitiba, Brazil, and Thessaloniki, Greece, will be transferred to the joint venture. Production at the Leipzig facility is guaranteed by contractual agreements until 2011. Curitiba will be an important production facility for the joint venture. For Thessaloniki different options are being evaluated.

Siemens Enterprise Communications will continue to be a preferred supplier to Siemens, to use the Siemens One sales network and to cooperate on customer projects with Siemens. Siemens Enterprise Communications innovative new products like the OpenScape UC Server will remain an integral part of the portfolio. Gores and Siemens have agreed that Siemens Enterprise Communications will continue to offer its OpenPath migration strategies for existing product families in order to ensure a smooth transition to the new Unified Communications solutions. Support and upgrades for Siemens Enterprise Communications products, especially HiPath 3000 and HiPath 4000, are to be continued for the long term.

The Gores Group, LLC, founded in 1987, is a private equity firm focused on acquiring controlling interests in businesses which can benefit from the firm’s operating experience and flexible capital base. The firm combines the operational expertise and detailed due diligence capabilities of a strategic buyer with the seasoned M&A team of a traditional financial buyer. The Gores Group maintains offices in Los Angeles, Boulder and London.