More on Siemens Enterprise and The Gores GroupMore on Siemens Enterprise and The Gores Group

No Jitter has been following this breaking story since early this morning, specifically Eric Krapf and Allan Sulkin. I'll now add my perspective fueled by an interview today with Siemens Enterprise Communications Chief Operating Officer Thomas Zimmermann. One of the goals articulated by Siemens since the beginning of its quest to find a partner for its enterprise business two years ago was to strengthen Siemens' market position in North America. How will the joint venture with The Gores Group achieve that?

No Jitter has been following this breaking story since early this morning, specifically Eric Krapf and Allan Sulkin. I'll now add my perspective fueled by an interview today with Siemens Enterprise Communications Chief Operating Officer Thomas Zimmermann.

One of the goals articulated by Siemens since the beginning of its quest to find a partner for its enterprise business two years ago was to strengthen Siemens' market position in North America. How will the joint venture with The Gores Group achieve that?According to Zimmermann that goal will be at least partially met by leveraging the existing Enterasys sales force and distribution channels to sell Siemens Enterprise Communications solutions. That said, one of the planned uses of the €350 million fund that has been established by Siemens and Gores is to further that objective, by investing in North America go-to-market initiatives - perhaps additional acquisitions - to "fix North America."

The agreement calls for The Gores Group to hold a 51 percent share and Siemens AG 49 percent of the joint venture. This is in contrast to the Siemens Nokia deal two years ago, which is a 50-50 JV. We asked Zimmermann about the significance of this.

Zimmermann said that the 51/49 arrangement reflects the preferences of the current Siemens AG management team (which has changed since the Nokia deal was struck). The 49 percent share communicates Siemens' clear desire to be a minority stakeholder in the venture.

Less obvious from the press announcement, however, is an additional safeguard that is part of the agreement. Siemens will have two of the five seats on the joint venture's board but will also have so-called Super Majority rights. Super Majority refers to the need for a two-thirds majority, instead of a simple majority, for a decision to be ratified. This ensures that on strategic issues Gores could not win every vote with a simple majority.

As part of its contribution to the joint venture The Gores Group is contributing two of its portfolio companies, security networking firm Enterasys and contact center application vendor SER Solutions. Zimmermann says that for the time being these will continue to run as separate entities. Clearly the next two months, until the planned completion of the deal, will be used to decide how the three companies can/will be spun together strategically.

Decisions on which existing Siemens executives will remain, and in what role, are also expected to be announced as the deal gets closer to being finalized, expected before the end of the Siemens fiscal year, September 30th. While a Gores executive, Mark Stone, will act as chairman of the joint venture and interim CEO, internal and external candidates are being interviewed for the post of permanent CEO.

The bottom line for existing and prospective customers is positive. Existing products will continue to be supported and new products will continue to be developed. What will be interesting to watch is how quickly Gores can turn Siemens Enterprise to profitability - a goal that has eluded some lately...