New York: Nokia’s strategic acquisition of U.S.-based optical networking firm Infinera for $2.3 billion positions the Finnish giant to capitalize on the burgeoning artificial intelligence (AI) landscape, fueled by massive investments in data centers worldwide.
The deal propels Nokia to the second-largest position in the optical networking market with a 20% share, trailing Huawei, which dominates amidst limited Western presence in China. Amidst sluggish 5G equipment sales, telecom manufacturers are diversifying into high-growth sectors like AI.
“This acquisition comes at an opportune moment as we anticipate a market recovery,” remarked Nokia CEO Pekka Lundmark. “AI is driving substantial data center investments, and expanding our presence in this sector is a key rationale behind the acquisition.”
Data centers, crucial for AI operations, rely on optical transport networks—fiber-optic cables transmitting digital signals—to facilitate seamless communication between electronic devices.
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Infinera specializes in intra-data center communications, vital for server-to-server interactions within data centers. According to Lundmark, this segment is poised for rapid growth within the broader communications technology market.
Nokia’s stock rose 4% on news of the acquisition, reflecting shareholder optimism. The deal, structured with 70% cash and 30% stock, aims to generate €200 million ($213.88 million) in cost savings post-closure in the coming year.
While some view the purchase price as steep given Infinera’s fluctuating growth, analyst Mads Rosendal from Danske Bank Credit Research believes potential synergies could justify the investment.
Infinera’s strong U.S. presence complements Nokia’s foothold in Europe and Asia, creating a synergistic alignment. Lundmark emphasized that discussions on potential workforce adjustments are premature at this stage.
