Based on a limited set of numbers released by Siemens AG (NYSE: SI - message board; Frankfurt: SIE) this week, financial analysts are bracing themselves for a poor first-quarter report from giant vendor Nokia Siemens Networks (NSN).

    NSN, a $23.2 billion-a-year supplier of infrastructure, software, and services to fixed, mobile, and cable operators, opened for business on April 1 and immediately announced reduced growth expectations. Its first three months of business will be reported by Nokia Corp. (NYSE: NOK - message board) when it announces its second-quarter earnings next Thursday, August 2. Analysts expect Nokia to announce a loss for the joint venture instead of the positive earnings before interest and tax (EBIT) that had been expected. (See Nokia Siemens Opens on a Downer and Nokia Siemens Reveals Product Picks.)

    Those disappointing expectations come as NSN is linked to a possible takeover bid for Tellabs Inc. (Nasdaq: TLAB - message board; Frankfurt: BTLA), a move that would propel it into the fiber access market and seriously strengthen its North American operations. (See Is Nokia Siemens Tailing Tellabs? and Tellabs Mum on M&A Talks.)

    So why are the analysts downbeat about NSN? Because this week Siemens AG announced a group operating profit of €1.5 billion ($2.05 billion) for its fiscal third quarter, "despite negative equity investment income of €371 million [$506 million] related to Nokia Siemens Networks (NSN)."

    Siemens, which counts NSN as a "strategic equity investment" (SEI), noted that Nokia Siemens "took a total of €905 million [$1.24 billion] in charges for previously announced restructuring and integration, including €646 million [$882 million] for severance." That "severance" refers to the initial stages of the significant staff reductions at NSN. (See NSN Details Job Cuts, NSN Cuts Swiss Staff, and Nokia Siemens to Cut 9,000.)