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Nokia Corporation NOK recently completed the acquisition of Infinera, a leading optical semiconductors and networking equipment maker. The acquisition has made Nokia one of the largest vendors in the optical networking market.
Background of Acquisition
Nokia inked a definitive agreement to acquire Infinera for $6.65 per share. Shareholders have the option to receive either cash, Nokia shares or a combination of both. Despite being a leader in the industry, Nokia’s optical networking business has been struggling in the last few quarters.
In 2024, the company reported 1.636 billion euros in revenues from the Optical Networks vertical, down 15.8% year over year. Intensifying competition from Huawei, Ericsson and Ciena Corporation, combined with macro headwinds, is straining Nokia’s profits. Amid this backdrop, the buyout of Infinera is a strategic move to counter these challenges.
On Feb. 26, 2025, Nokia secured unconditional approval from the European Commission for the acquisition.
Will the Buyout Drive NOK’s Share Price?
Infinera is renowned for its leading-edge optical semiconductors and optical networking solutions that efficiently accelerate service innovation, scale network bandwidth and automate network operations. It has a strong customer base, spanning carriers, cloud operators, service providers, government and fast-growing web scale space.
NOK boasts a comprehensive solution of Optical Networking products that includes network solutions, core optical transport, access and metro transport, optical network management and automation solutions.
The acquisition offers several key advantages for Nokia. Integration Infinera’s advanced capabilities with Nokia’s comprehensive portfolio will create a powerhouse in the optical networking market. This move will significantly boost the scalability of NOK’s optical network business, accelerate product developments and broaden its offerings for a wide range of customers. Owing to limited customer overlap, the acquisition will bolster Nokia’s market presence in areas such as North America, where Infinera has a solid presence. This will diversify Nokia’s customer base by expanding its presence in the fast-growing web scale market.
Growing networking demand to support AI workloads in data centers boasts an immense opportunity for Nokia’s optical network business. The acquisition will allow it to capitalize on this emerging market trend. The combination of cutting-edge research capabilities of Nokia Bell Labs and Infinera will better equip the joint entity to fend off competition from other market leaders such as Huawei and increase commercial prospects across several verticals including enterprise, utilities, government, education and more.
From a financial point of view, the buyout is expected to be accretive to NOK’s profitability. By 2027, the company is expected to derive more than 200 million Euros of net comparable operating profit synergies from the deal. Moreover, it is also expected to be accretive to NOK’s comparable EPS by more than 10% in 2027.