Rob Black's Tech Stock Report

Nokia (NOK) and Siemens (SI) will merge their Networks businesses into a 50/50 JV w combined revenue of €15.8 billion. The JV will include all of Nokia’s Networks business and Siemens’ carrier-related businesses (excluding enterprise). Simon Beresford-Wylie, EVP of Nokia Networks, will become the JV’s CEO and Peter Schonhofer of Siemens will become the JV’s CFO. Corporate headquarters will be based in Finland.

The transaction is being viewed favorably. Doubles the size of the wireless biz & guidance of €1.5 billion in annual synergies (estimate 750 bp’s). In addition to scale, procurement, and duplicate R&D, NOK’s rev/employee in Networks is 70% higher than Siemens. Other benefits for NOK include increased penetration in MEA, immediate access to wireline portfolio, and removes aggressive player.

The biggest challenge is executing on headcount reduction. The JV identified 10-15% employee headcount reduction. In the past 3 years, Siemens has held its employee base in Communications (incl Enterprise - not part of JV) constant at 54k despite the fact that this segment has struggled. The other challenge is managing a wireline business where NOK has not had much exposure. This creates a stronger competitor in wireless but removes an aggressive player in terms of pricing and helps the industry cope with overcapacity.

Thus, this is positive for large infrastructure players including Ericsson (ERICY) and Alcatel/Lucent (LU). Negative for Nortel (NT) which still badly needs a partner. For Motorola, slightly negative although Networks only 15% of sales. Neutral for Juniper/Siemens resale agreement. Given the structure of the JV, do not expect this to be a drag on cash flow or affect the 10% buyback. NOK remains a handset story, but the JV should help NOK recognize the 13% LT Networks op margin it has been targeting.

ChinaTechNews Microsoft has launched five new channels on its Chinese website in its bid to create a lifestyle portal for white collar Chinese. Since it launched its Chinese website in May 2005, M.S.N. has been expanding the content on the website in cooperation with local Internet content providers.

Intel (INTC), the world's largest maker of computer chips, was raised to 'buy' by UBS analyst Thomas A. Thornhill, who forecast higher profitability as semiconductor demand increases this year. UBS's 12-month share price estimate for Intel was raised to $23, while its 2007 earnings estimate was lifted to $1.28 a share from $1.22.

Monster Worldwide (MNST), operator of the Monster.com job- listing service, was raised to 'overweight/in-line' by analyst Lisa Monaco at Morgan Stanley. The company will be able to withstand a potential U.S. slowdown as its non-U.S. operations increase in importance.

Vonage Holdings (VG) received a patent-infringement lawsuit filed by a pair of Verizon Communications subsidiaries. Vonage said the suit encompasses seven patents related to VoIP, short for voice over Internet protocol technology. Vonage believes it's relied on its own proprietary technology and technology licensed from third parties and vowed to "vigorously defend" the lawsuit, having hired outside counsel specializing in intellectual property to investigate the matter.

LightReading reports the recent stock options backdating issues at Juniper (JNPR) could end up having serious repercussions for the company, possibly even leading to the ouster of some of its top executives. One analyst source confirms that people in the investment community are talking about a potential change in co leadership.

McAfee (MFE) announced that McAfee Host Intrusion Prevention and McAfee ePolicy Orchestrator has been selected as the baseline for the U.S. Department of Defense's Host-Based Security System.