The Acquisition of Infinera by Nokia: A Game-Changer in the Optical Networking Industry

Key Takeaways

• Shares of Infinera soared in premarket trading Friday, a day after the optical networking solutions company agreed to be acquired by Nokia for $2.3 billion.
• The deal is set to close in the first half of next year.
• Nokia said it expects savings in the hundreds of millions of euros by 2027 as the companies integrate their tech and services.

Shares of Infinera (INFN) soared in premarket trading Friday, a day after the optical networking solutions company agreed to be acquired by Finnish telecommunications firm Nokia (NOK) for $2.3 billion. The deal values California-based Infinera at $6.65 per share, and will be paid at least 70% in cash, with shareholders also able to receive up to 30% of the deal’s value in American depositary shares (ADSs) of Nokia, the companies said Thursday. Shareholders will be able to receive either $6.65 in cash, about 1.8 Nokia shares, or a combination of lower amounts of both cash and stock in exchange for each Infinera share they owned previously.

Nokia Can Gain Exposure To AI Market

Infinera manufactures a number of networking-related products like optical semiconductors, meaning the acquisition can give Nokia larger exposure to the artificial intelligence (AI) data center market that has seen increased demand in the last year. “We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks,” Nokia Chief Executive Officer (CEO) Pekka Lundmark said. “The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles.”

The companies said by combining, they “will improve Nokia’s optical scale” in North America, where Infinera generates about 60% of its sales, and “complement Nokia’s strong positions in APAC, EMEA and Latin America.”

Deal Expected To Close in First Half of 2025

The deal is set to close in the first half of next year assuming it’s approved by Infinera shareholders and U.S. regulators, and Nokia said it expects to see an estimated 200 million euros ($214 million) in “net comparable operating profit synergies by 2027.” Lundmark told Reuters Friday that one of the “key attractions” of the deal was how much it would increase Nokia’s exposure to the data center market at a time when AI is driving significantly increased spending on data centers.

Infinera shares soared about 18% to $6.20 about 45 minutes before the opening bell Friday. American depositary receipts (ADRs) of Nokia were little changed.

The acquisition of Infinera by Nokia marks a significant move in the optical networking industry. With Infinera’s expertise in networking products like optical semiconductors and Nokia’s strong presence in telecommunications, the merger is expected to create synergies that will benefit both companies and their customers.

Benefits of the Acquisition

One of the key benefits of this acquisition is Nokia’s increased exposure to the AI data center market. As demand for AI technologies continues to grow, having a strong presence in this market will position Nokia as a leader in providing cutting-edge solutions to its customers.

Additionally, the integration of technologies and services from both companies is expected to result in cost savings in the hundreds of millions of euros by 2027. This efficiency will not only benefit the companies financially but also allow them to offer more competitive pricing and innovative solutions to their customers.

Looking Ahead

With the deal expected to close in the first half of next year, all eyes are on the successful integration of Infinera into Nokia’s operations. The combined expertise and resources of both companies are poised to drive growth and innovation in the optical networking industry, setting a new standard for technological advancements and customer satisfaction.

Overall, the acquisition of Infinera by Nokia represents a strategic move that will reshape the landscape of the optical networking industry. As both companies work towards a seamless integration, the future looks promising for their employees, shareholders, and most importantly, their customers.

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