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Nokia and Infinera have announced a definitive agreement under which Nokia will acquire Infinera in a transaction valuing the company at an enterprise value of USD 2.3 billion.

Nokia and Infinera anticipate that together, they will enhance scale and profitability, accelerating the development of new products and solutions for customers.

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Financial and Strategic Merit

Commenting on this strategic investment, Pekka Lundmark, President and CEO of Nokia, said, “We believe now is the right time to take a compelling inorganic step to further expand Nokia’s scale in optical networks. The combined businesses have a strong strategic fit given their highly complementary customer, geographic and technology profiles.”

The transaction aligns with Nokia’s strategy to enhance its technological leadership in optical networks and expand its reach to webscale customers—the fastest-growing market segment.

As a result, Nokia expects this acquisition to accelerate its journey toward a double-digit operating margin in its Optical Networks business and aims to achieve EUR 200 million in net comparable operating profit synergies by 2027. The deal could also yield a return on invested capital (RoIC) well above Nokia’s weighted average cost of capital (WACC).

In tandem with the recent sale of Submarine Networks, this deal reshapes Nokia’s Network Infrastructure into three pillars: Fixed Networks, IP Networks, and Optical Networks. The vendor is aiming to achieve mid-single digit organic growth in its Network Infrastructure and an improved operating margin in the mid-to-high teens.

Sharing his remarks on the acquisition, Federico Guillén, President of Network Infrastructure at Nokia, stated, “This acquisition will further strengthen the optical pillar of our business, expand our growth opportunities across all our target customer segments, and improve our operating margin. I am extremely pleased that we are bringing together these two talented and dedicated teams. Separately, we have long respected each other as competitors. Together, we find the logic of combination irresistible.”

Similarly, Infinera’s investors will also benefit from investing in a global leader in optical networking solutions.

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Further Expansion

Expressing his excitement regarding the value of this combination, David Heard, CEO of Infinera, added, “We believe Nokia is an excellent partner and together we will have greater scale and deeper resources to set the pace of innovation and address rapidly changing customer needs at a time when optics are more important than ever—across telecom networks, inter-data center applications, and now, inside the data center.”

Enhancing Global Scale and Product Development: The acquisition will boost Nokia’s Optical Networks business by 75%, accelerating its product roadmap and expanding its offerings. This will deliver superior products for customers and create a business that can sustainably compete in the market.

Leveraging Significant In-House Capabilities: The combined business will be a strong innovative player with a deep and diverse pool of optical networking talent and expertise. Together, they will have access to an expanded digital signal processor (DSP) development team, expertise across silicon photonics and indium phosphide-based semiconductor material sciences, and deeper competency in photonic integrated circuit (PIC) technology.

Achieving Scale in North America’s Optical Market: Infinera has built a solid presence in the North American optical market, representing an estimated 60% of its sales, which will improve Nokia’s optical scale in the region and complement Nokia’s strong position in the APAC, EMEA and Latin America regions. Moreover, it will build on Nokia’s commitment to investment in US-based manufacturing and advanced testing and packaging capabilities.

Accelerating Nokia’s Expansion into Enterprise, Particularly Webscale: The combination of these two businesses is also expected to accelerate Nokia’s strategic goal of diversifying its customer base and growing in the enterprise sector.

Internet content providers (ICPs), or webscale customers as Nokia refers to them, represent over 30% of Infinera's sales. Infinera has firmly established itself in this fast-growing market with recent achievements in line systems and pluggables.

Additionally, Infinera has been developing high-speed, low-power optical components for intra-data center (ICE-D) applications, which are particularly suited for AI workloads, and present a promising long-term growth opportunity.

Overall, the acquisition will significantly improve Nokia's penetration into the webscale segment.

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