- The combined businesses are positioned to command 20% of the global optical market share, said Dell’Oro analyst Jimmy Yu
- Nokia will pay at least 70% in cash
- The Finnish vendor says the purchase of Infinera will increase the scale of its Optical Networks business by 75%
Nokia is having a big day wheeling and dealing. The Finnish company said this afternoon it is buying the optical networking vendor Infinera for $6.65 per share, equating to a value of $2.3 billion. And earlier today, Nokia said it was proposing to sell its Alcatel Submarine Networks business to the French state.
The Infinera transaction represents a premium of 28% to Infinera’s share price at the close of June 26. Nokia will pay at least 70% in cash, and Infinera’s shareholders can elect to receive up to 30% of the consideration in the form of stock in Nokia American Depositary Shares (ADSs).
Pekka Lundmark, President and CEO of Nokia, stated, “In 2021 we increased our organic investment in Optical Networks with a view to improving our competitiveness. That decision has paid off and has delivered improved customer recognition, strong sales growth and increased profitability. We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in Optical Networks.”
The acquisition will strengthen Nokia’s optical position in North America. Sixty percent of Infinera’s sales come from North America, complementing Nokia’s strong positions in APAC, EMEA and Latin America.
The company stated today that the purchase of Infinera and the potential sale of its Submarine Networks will create a reshaped Network Infrastructure business unit built on three pillars: Fixed Networks, IP Networks and Optical Networks.
Federico Guillén, president of Network Infrastructure at Nokia, said of the purchase of Infinera, “We have long respected each other as competitors. Together, we find the logic of combination irresistible.”
Dell’Oro analyst Jimmy Yu told Fierce Network, “This is a complete surprise! It does seem like a good acquisition for Nokia.”
Yu added, “It gives the company more in-house optical component technology and a larger customer base that, as they mentioned, has very little overlap. Also, I think the cultural fit may be really good considering that Infinera acquired Coriant, a spin-off of Nokia Siemens’s optical business unit. Using my 2023 report figures as a proxy, the combined Nokia and Infinera optical business is positioned to have 20% of the global market share and 28% when excluding the China market. This will help Nokia become a top optical systems supplier.”
Yu’s reaction to the news is a good omen for Nokia, whose recent earnings reports have been blood baths. In its first quarter 2024, Nokia saw a 20% year-over-year decline in net sales, reporting €4.67 billion ($4.95 billion) compared to €5.86 billion ($6.24 billion) in the same quarter a year ago.
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At the time, Lundmark said the outlook for Network Infrastructure (NI) for 2024 has improved, but that Optical Networks within NI may take somewhat longer. “We expect Network Infrastructure will return to net sales growth for full year 2024 with a stronger second half performance,” said Lundmark.
Nokia says the purchase of Infinera will increase the scale of its Optical Networks business by 75%, “creating a business that can sustainably challenge the competition.” Some of its biggest competitors are Ciena, Fujitsu and Cisco in the Western world and Huawei and ZTE in other geographies.
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Nokia also said the combined business will have significant in-house capabilities, including an expanded digital signal processor (DSP) development team, expertise across silicon photonics and deeper competency in photonic integrated circuit (PIC) technology.
The transaction is targeted to close during the first half of 2025.
