Nokia Networks, the core business wing of Nokia Corporation (NOK), has completed the acquisition of part of the wireless network business of Panasonic Corp. The company expects the deal to further enhance its mobile broadband portfolio, augment the effectiveness and quality control of its product development and R&D activities, and also strengthen its presence in Japan’s mobile infrastructure market.
Notably, the deal, which was struck in Jul 2014, covered the base station operations of Panasonic System Networks – the radio access network (RAN) division of the Japanese consumer electronics behemoth. In particular, Nokia has acquired Panasonic’s 4G and 3G wireless base station unit and related wireless equipment business. The deal also includes the transfer of Panasonic’s fixed assets and business contracts, and transfer of over 300 of its employees to Nokia.
Interestingly, Nokia Networks operates as the sole overseas dealer providing network infrastructure, software and services to all Japanese telecom operators. This acquisition would augment its exposure further in the Japanese mobile market and thus allow it to become the pioneer in mobile broadband services.
Meanwhile, in Apr 2014, Nokia sold its loss-making mobile business to Microsoft Corp. (MSFT) and instead, shifted focus to its three more profitable operations: networks, HERE mapping services and software. However, the company is now planning to return to the consumer market with a new Android tablet N1, which is being manufactured by Taiwan-based device maker Foxconn and is due for launch in the first quarter of 2015.
In our opinion, the acquisition marks an optimistic start to the year for the Finnish telecommunication company. Moreover, for the company, Nokia Networks remains a strong pillar of growth. In Nov 2014, Nokia had raised its operating margin guidance for 2015 and beyond to 8–11% from a previous projection of 5–10%.
Moreover, improved credit ratings, continuous contract wins, aggressive 4G LTE network deployment across China and higher investments in network restructuring by emerging nations should bolster top-line growth for Nokia, going forward.
Nokia currently retains a Zacks Rank #3 (Hold).
Stocks that Warrant a Look
Better-ranked wireless stocks that warrant a look include Aruba Networks, Inc. (ARUN) and InterDigital, Inc. (IDCC). Both the stocks sport a Zacks Rank #1 (Strong Buy).
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