Nokia’s $2.3 billion acquisition of Infinera: Boosting its Optical Networks Business and Long-Term Growth

Nokia, a leading network equipment manufacturer, has announced the acquisition of Infinera, a Californian manufacturer of optical network solutions and semiconductors, for around 2.3 billion US dollars. With this acquisition, Nokia aims to expand its optical networks business and accelerate product development. The transaction is expected to create a scalable and global optical network business, enhancing Nokia’s technology portfolio and market position in North America.

As part of the deal, Nokia will pay $6.65 per share for Infinera, which is 28 percent higher than Infinera’s closing price on Wednesday. This acquisition forms part of Nokia’s strategic growth plan, aiming for a double-digit operating profit percentage in the Optical Networks business. Nokia is committed to achieving an annual organic growth rate of 4-6 percent and an operating profit margin of 14-18 percent for the combined business units.

The purchase price will be paid in a combination of cash and shares, with a minimum of 70 percent in cash. Nokia plans to increase its share buyback program to counteract the dilutive effect of the transaction, which will be financed from Nokia’s cash resources. The company expects to achieve synergy benefits of 200 million euros in comparable operating profit by 2027 as a result of this deal. It is projected to enhance Nokia’s comparable operating profit and earnings per share in the first year and deliver over a ten percent increase in comparable earnings per share by 2027.

By combining forces with Infinera and selling its submarine network business, Nokia will establish a strong Network Infrastructure business group encompassing Fixed Networks, IP Networks, and Optical Networks. The goal is to enhance the scale and competitiveness of the optical business through acquisitions, driving value for shareholders and creating long-term growth opportunities. CEO Pekka Lundmark expressed confidence in the acquisition, stating that it would significantly benefit shareholders and reinforce Nokia’s position in the optical networks market.

In conclusion, this acquisition by Nokia will undoubtedly bring significant benefits not only to itself but also to its stakeholders as it aims to expand its optical networks business while accelerating product development through acquisitions such as Infinera’s purchase.