Yahoo Finance Nokia (NOK) to Divest Submarine Business for Core Focus
Nokia Corporation NOK recently inked a put option agreement with the French State for the divestiture of its submarine network business, Alcatel Submarine Networks (“ASN”). By selling ASN its non-core standalone business, Nokia is aiming to emphasize the growth potential in its core markets and improve the profitability of the Network Infrastructure business group.
The deal, subject to formal consultation of ASN’s French Works Council, regulatory approvals and customary closing conditions, is expected to close at the end of 2024 or early 2025. Agence des Participations de l’Etat, representing the French State, will acquire 80% of the stake, while Nokia will retain a 20% stake to ensure a smooth transition till the targeted exit.
ASN, a global leader in submarine communication networks, has witnessed significant revenue growth under Nokia’s ownership. Recognizing the rich heritage and industry expertise of the ASN, the French State has committed to maintaining investment and support for its sustainable development. This will offer a stable platform for ASN to broaden its technology offerings and capitalize on the growing demand in the subsea cable market.
These developments underscore Nokia’s approach to active portfolio management and prioritization of key strategic assets. This divestiture will likely be beneficial for the company’s core businesses, including Fixed Networks, IP Networks and Optical Networks.
Beginning from the second quarter of 2024, Nokia will likely report the ASN business as a discontinued operation. Due to this, Nokia estimates a net sales reduction of around 1 billion Euros in the Network Infrastructure segment. However, the operating margin is expected to improve 100-150 basis points. Management reaffirmed that its guidance stated during the first quarter of 2024 earnings remains unchanged.
Leveraging state-of-the-art technology, Nokia is transforming the way people and things communicate and connect with each other. These include a seamless transition to 5G technology, ultra-broadband access, IP and Software Defined Networking, cloud applications and Internet of Things. The company currently has 319 commercial 5G deals with communications service providers globally. It has 110 live 5G networks, both public and private.
The stock has declined 10.9% in the past year against the industry’s growth of 40.3%.
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Zacks Rank & Stocks to Consider
Nokia currently carries a Zacks Rank #3 (Hold).
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NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit. Over the years, the company’s focus evolved from PC graphics to AI-based solutions that support high-performance computing, gaming and virtual reality platforms.
Arista Networks, Inc. ANET, sporting a Zacks Rank #1 at present, is likely to benefit from strong momentum and diversification across its top verticals and product lines. The company has a software-driven, data-centric approach to help customers build their cloud architecture and enhance their cloud experience. Arista has a long-term earnings growth expectation of 15.68% and delivered an earnings surprise of 15.39%, on average, in the trailing four quarters.
It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed datacenter segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products and remains well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.
Silicon Motion Technology Corporation SIMO, sporting a Zacks Rank #1 at present, delivered a trailing four-quarter average earnings surprise of 4.72%.
It is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company also designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers.
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