HELSINKI (AP) — Nokia said Monday that it will buy Siemens' half of their joint network operations in a 1.7 billion euro ($2.22 billion) deal, sending its shares surging more than 7 percent.
The transaction, to be completed during the third quarter this year, will mean that the joint venture between Nokia Corp. and Germany's Siemens AG will become a wholly owned subsidiary of the Finland-based company. The two companies formed the joint venture in 2007.
Nokia's share price jumped more than 7 percent to 3.04 euros in morning trading in Helsinki, while Siemens stock was up 1.4 percent at 78.77 euros.
Nokia Siemens Networks had been lossmaking for several years amid speculation and rumors that it was an acquisition target. Meanwhile, Nokia also began to struggle with its core production of cellphones, losing its dominant market position.
Nokia's German giant partner, with 370,000 employees worldwide, also has been looking to cut costs.
In November it launched a program aimed at saving 6 billion euros by 2014. It has announced plans to restructure its water business and sell its solar energy business.
In May, the Munich-based industrial conglomerate warned that earnings for its 2013 financial year, which ends in September, would come in at the "low end" of forecasts due to numerous one-time charges and restructuring costs.
Recently, however, Nokia Siemens Networks has shown signs of improvement after restructuring and substantial job cuts, with a small first-quarter operating profit this year compared to a 1 billion euros loss in the same period in 2012.
Nokia chief executive Stephen Elop was upbeat about the company's operational and financial performance and said that the company had also made strides in developing LTE, or long-term evolution, high-speed data.
"Nokia Siemens Networks has established a clear leadership position in LTE, which provides an attractive growth opportunity," Elop said. "Nokia is pleased with these developments and looks forward to continue supporting these efforts to create more shareholder value for the Nokia group."
Nokia, once the dominant cellphone maker, is struggling in the smartphone market against Samsung, Apple's iPhone and handsets that use Google's Android software. It is also being squeezed at the lower end against Asian manufacturers making cheaper handsets.
Nokia said that the operational headquarters of the networks sector will remain in Espoo, near the Finnish capital of Helsinki. But Nokia said, it "will continue to have a strong regional presence in Germany."
The Siemens name will be phased out from Nokia Siemens Networks' company name and branding, with the company's new name to be announced at the closing of the transaction.