Gores Group to buy 51% of Siemens communications division

Siemens Enterprise Communications has entered into a partnership with a U.S. private equity group, the Gores Group LLC, in which they will invest about US$545 million to help grow the Siemens AG division, the companies announced today in Munich, Germany.

As its share, Gores, based in Los Angeles, will invest about $273 million to buy a 51% stake in the joint venture. Gores already owns a network equipment and security software company, Enterasys Networks Inc., and a call center software company, SER Solutions.

Gores will combine Enterasys and SER with the Siemens division to create a "more complete enterprise networking and communications offering" with global distribution capabilities, said Alec Gores, founder and CEO of The Gores Group, in a statement.

Siemens AG undertook a reorganization of Siemens Enterprise Communications last February. Siemens CFO Joe Kaeser said the Gores investment will benefit both customers and employees in the long term.

A statement by the two companies said the investments will be used in part to acquire other technologies as Siemens Enterprise Communications focuses on transitioning from a traditional networking hardware supplier to a software and service provider. Its best known products, such as the OpenScape UC Server and HiPath 3000 and 4000 switches, will remain in the Siemens Enterprise Communications portfolio with long-term support and upgrades.

The Siemens brand name will continue on the products, while Siemens patents and licenses will be transferred to the joint venture. Production facilities in Leipzig, Germany, Curitiba, Brazil, and Thessaloniki, Greece, will be transferred to the joint venture as well.

The joint venture faces regulatory approval, but should be closed by the end of Siemens' 2008 fiscal year, which is Sept. 30, the companies said. In fiscal 2007, Siemens Enterprise Communications had nearly $5 billion in revenues.