The $2.3bn deal is being driven by the boom in artificial intelligence and would help Nokia to become the second largest vendor in the optical networking market with a market share of around 20%, behind the market leader Huawei.
Nokia, like many telecom equipment makers, has been struggling with lower sales of 5G equipment so this move would help the company to diversify and, more importantly, to sell more equipment to some of the big tech companies including the likes of Amazon, Alphabet and Microsoft.
These companies are investing, or planning to invest, billions of dollars in building new data centres to service the ongoing boom in artificial intelligence.
Data centres use optical transport networks to allow electronic devices to talk to each other and Infinera has built a strong market position in intra data centre communications, which refers to server-to-server communications inside data centres.
Another big benefit for Nokia from the deal is the fact that Infinera gets about 60 per cent of its business from the US, while Nokia’s main markets are in Asia and Europe.
In short, while Nokia may be paying top dollar for this company it is entering one of the fastest growing segments in the overall communications technology market.
