Nokia acquires optical chip specialist Infinera

Nokia had little presence in the optical networks space until 2021, when it began investing in its own solutions. Now, it has clearly decided the time is right to acquire its way to more market share. Indeed, it says it expects the Infinera deal to bolster its optical networks business by 75% and will "accelerate Nokia’s journey to a double-digit operating margin in its optical networks business".

The post-merger combined entity will boast substantial in-house capabilities, including a larger digital signal processor development team, and expertise in silicon photonics, indium phosphide-based materials, and photonic integrated circuit technology.

The two firms summarised the benefits as follows:

• Creates a scaled and global optical business with increased in-house technology capabilities and vertical integration.
• Strengthens Nokia’s optical position, specifically in North America.
• Accelerates Nokia’s customer diversification strategy, expanding webscale presence.
• Targeted net comparable operating profit synergies of EUR 200 million by 2027.
• Expected to be accretive to Nokia’s comparable operating profit and EPS in year 1 and to deliver over 10% comparable EPS accretion in 2027.

Pekka Lundmark, Nokia president and CEO, said: “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.”