Nokia Expands Network Infrastructure Division through Acquisition of Infinera

Nokia Oyj has acquired Infinera to enhance its Network Infrastructure business, enriching its portfolio with IP routers and optical networking solutions. The company, known for telecom equipment development and professional services, reported sales split across mobile broadband network solutions (44%), network infrastructure solutions (36.1%), software development (14.5%), advanced technology (4.9%), and other (0.6%). Sales are distributed globally with significant contributions from Europe, North America, India, and the Asia-Pacific region.

Nokia Oyj (NYSE: NOK), a leading telecom equipment developer and professional services provider, has announced its acquisition of Infinera (NASDAQ: INFN), a global supplier of innovative open optical networking solutions and advanced optical semiconductors [1]. The deal, valued at $2.3 billion or $6.65 per share, is expected to close in the second half of 2024, subject to regulatory approvals and other customary conditions.

The acquisition aims to create a highly scaled and truly global optical business, enhancing Nokia's optical position, specifically in North America [1]. Additionally, it accelerates Nokia's customer diversification strategy, expanding its webscale presence [1].

Infinera's portfolio encompasses IP routers and optical networking solutions, which will significantly enrich Nokia's network infrastructure business [1]. With this acquisition, Nokia targets net comparable operating profit synergies of EUR 200 million by 2027, projecting a double-digit operating margin for its Optical Networks business [1].

Nokia reported sales split across various segments in 2023, with mobile broadband network solutions accounting for 44%, network infrastructure solutions for 36.1%, software development for 14.5%, advanced technology for 4.9%, and other for 0.6% [2]. The company's sales are distributed globally, with significant contributions from Europe, North America, India, and the Asia-Pacific region [2].

The acquisition of Infinera is expected to be accretive to Nokia's comparable operating profit and EPS in the first year and deliver over 10% comparable EPS accretion in 2027 [1]. Nokia intends to increase its share buyback program to offset the dilution from the deal, and at least 70% of the consideration will be paid in cash [1].

Nokia and Infinera believe that merging will improve scale and profitability, enabling the combined business to accelerate the development of new products and solutions to benefit customers [1]. This transaction aligns strongly with Nokia's strategy, as it is expected to strengthen the company's technology leadership in optical and increase exposure to webscale customers, the fastest-growing segment of the market [1].

References:
[1] Nokia to Acquire Infinera. (2024, June 27). Nokia. https://www.infinera.com/press-release/nokia-to-acquire-infinera/
[2] Nokia Oyj Annual Report 2023. (2024). Nokia. https://www.nokia.com/content/dam/Nokia_www/Documents/reports-and-financials/annual-reports/2023/nokia-annual-report-2023.pdf