Nokia Corporation NOK recently completed the acquisition of Infinera, a leading optical semiconductors and networking equipment maker. The acquisition has made Nokia one of the largest vendors in the optical networking market.

Background of Acquisition 

Nokia inked a definitive agreement to acquire Infinera for $6.65 per share. Shareholders have the option to receive either cash, Nokia shares or a combination of both. Despite being a leader in the industry, Nokia’s optical networking business has been struggling in the last few quarters.

In 2024, the company reported 1.636 billion euros in revenues from the Optical Networks vertical, down 15.8% year over year. Intensifying competition from Huawei, Ericsson and Ciena Corporation, combined with macro headwinds, is straining Nokia’s profits. Amid this backdrop, the buyout of Infinera is a strategic move to counter these challenges.

On Feb. 26, 2025, Nokia secured unconditional approval from the European Commission for the acquisition.

Will the Buyout Drive NOK’s Share Price?

Infinera is renowned for its leading-edge optical semiconductors and optical networking solutions that efficiently accelerate service innovation, scale network bandwidth and automate network operations. It has a strong customer base, spanning carriers, cloud operators, service providers, government and fast-growing web scale space.

NOK boasts a comprehensive solution of Optical Networking products that includes network solutions, core optical transport, access and metro transport, optical network management and automation solutions. 

The acquisition offers several key advantages for Nokia. Integration Infinera’s advanced capabilities with Nokia’s comprehensive portfolio will create a powerhouse in the optical networking market. This move will significantly boost the scalability of NOK’s optical network business, accelerate product developments and broaden its offerings for a wide range of customers. Owing to limited customer overlap, the acquisition will bolster Nokia’s market presence in areas such as North America, where Infinera has a solid presence. This will diversify Nokia’s customer base by expanding its presence in the fast-growing web scale market. 

Growing networking demand to support AI workloads in data centers boasts an immense opportunity for Nokia’s optical network business. The acquisition will allow it to capitalize on this emerging market trend. The combination of cutting-edge research capabilities of Nokia Bell Labs and Infinera will better equip the joint entity to fend off competition from other market leaders such as Huawei and increase commercial prospects across several verticals including enterprise, utilities, government, education and more.

From a financial point of view, the buyout is expected to be accretive to NOK’s profitability. By 2027, the company is expected to derive more than 200 million Euros of net comparable operating profit synergies from the deal. Moreover, it is also expected to be accretive to NOK’s comparable EPS by more than 10% in 2027.

NOK Stock's Price Movement

Shares of Nokia have gained 33% in the past year compared with the industry’s growth of 47%.

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NOK’s Zacks Rank and Key Picks

Nokia currently carries a Zacks Rank #3 (Hold). 

Some better-ranked stocks in the broader industry have been discussed below.

InterDigital IDCC sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, it delivered an earnings surprise of 158.41%. It is a pioneer in advanced mobile technologies that enable wireless communications and capabilities. The company designs and develops a wide range of advanced technology solutions used in digital cellular, wireless 3G, 4G and IEEE 802-related products and networks.

Celestica Inc. CLS sports a Zacks Rank #1 at present. The company provides competitive manufacturing technology and service solutions for printed circuit assembly and system assembly, as well as post-manufacturing support to many of the world's leading original equipment manufacturers.

United States Cellular Corporation USM sports a Zacks Rank of 1 at present. In the last reported quarter, it delivered an earnings surprise of 150%.

U.S. Cellular has taken concrete steps to accelerate subscriber additions and improve churn management. The company aims to offer the best wireless experience to customers by providing superior quality network and national coverage. It is well-positioned to support the investment required for network enhancements, including the deployment of 5G technology.

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This article originally published on Zacks Investment Research (zacks.com).

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