Nokia's (NYSE:NOK) $2.3 billion bid to acquire U.S. optical networking gear maker Infinera (NASDAQ:INFN) is set to position the Finnish company to capitalize on the burgeoning investments in data centers driven by the rise of artificial intelligence (AI).
This strategic move is expected to propel Nokia to the second-largest vendor in the optical networking market with a 20% share, surpassing Ciena and trailing only behind Huawei, which benefits from the limited presence of Western companies in China.
Nokia’s acquisition of Infinera will enable it to sell more equipment to major tech giants such as Amazon, Alphabet, and Microsoft, all of whom are investing heavily in new data centers to support AI advancements.
Infinera excels in intra data center communications, facilitating server-to-server interactions within data centers—a segment predicted to be one of the fastest-growing in the communications technology market, according to Nokia CEO Pekka Lundmark.
Nokia plans to finance 70% of the purchase price in cash and the remaining 30% in stock, and anticipates saving €200 million ($213.88 million) in costs after the deal closes next year.