Nokia’s management hinted the telecommunications equipment giant could look to further bolster its optical networking business, which is set to gain a hyperscaler-focused boost from its pending deal to acquire Infinera.

Nokia CEO Pekka Lundmark said during the vendor’s second-quarter earnings call that “there could be bolt-on acquisitions” for the vendor’s optical network operations post-Infinera, but added that any move would have to be fiscally responsible.

“When it comes to additional deals, we continue to be extremely prudent,” Lundmark said. “There could be bolt-on acquisitions, but any acquisitions would have to follow extremely strong and compelling industrial logic. Strong synergies, strong logic. That will always be a prerequisite for any acquisition.”

Nokia earlier this month announced plans to acquire Infinera for $2.3 billion. Nokia management reiterated that the deal will boost its presence in the optical networking space, especially with hyperscalers where Infinera has a strong foothold, and that the deal will generate more than $200 million in operating profit synergies by 2027.

Jimmy Yu, VP at Dell’Oro Group, noted at that time that the deal solidifies Nokia as one of the optical networking market’s big three alongside Huawei and Ciena. He explained that those two plus the enhanced Nokia will control around 70% of the worldwide optical networking space, excluding China where Huawei holds a dominant position.

“This is a pretty significant acquisition in that sense,” Yu said.

That significance will be most prominent in North America, where Infinera garners around 60% of its sales. That includes a strong presence with webscale providers, which Nokia noted is “the fastest growing segment of the market.”

Yu said the deal also helps solidify what at one point was a highly competitive and cutthroat optical networking business.

Dell’Oro Group recently noted that the broader optical transport market dropped 13% year over year during the first quarter, which Yu attributed to “communication service providers becoming increasingly cautious about the macroeconomic conditions, causing them to delay projects into future quarters.” That Q1 dip is expected to feed into a full-year 2% drop in market revenues.

A prolonged dip could put more pressure on smaller rivals to either bolster their niche or find a path out, which could play into Lundmark’s desire of possible optical networking expansion at the right price.

Yu did note that the competitive drop from these larger players is significant, with Dell’Oro Group’s numbers showing Fujitsu as the nearest rivals.

AT&T accelerates payment Nokia’s optical networking ambitions could also be boosted by the vendor pocketing an accelerated $163 million from AT&T tied to Nokia losing out on the carrier’s ambitious open radio access network (RAN) plans.

AT&T late last year tapped Nokia rival Ericsson to head the carrier’s multi-year, $14 billion open RAN initiative. The move basically slammed the door on Nokia gaining any significant open RAN business from the carrier and signaled the end of an equipment deal Nokia initially signed with AT&T in 2021. As a result of recent negotiations tied to tying up the loose ends of that deal, AT&T agreed to accelerate a $163 million payment to Nokia.

Despite losing out on that high-profile deal, Nokia remains confident on its telecom equipment future, highlighting various RAN deals in Europe and more opportunities as more Western countries look to drive China-made equipment from their telecommunications infrastructure.

Lundmark also pointed to opportunities in gaining market share in core network deployments, which continues to underperform expectations. Dell’Oro Group recently reported that mobile core network market revenues will drop 10% over the next four years due to “severe economic headwinds, primarily the high inflation rates, and the slow adoption of 5G standalone networks by mobile network operators.”

This slowdown has resulted in some vendors exiting the space, most notably Microsoft’s recent moves to alter direction on its 5G core operations based on its past Affirmed Networks and Metaswitch acquisitions.

“The core network market is consolidating,” Lundmark opined. “You may have seen the Microsoft announcement that they are reconsidering Affirmed and Metaswitch, their core network approach. Core network is a market where even in those countries that have not restricted specifically Chinese out, they are making moves on the core network in terms of high-risk vendors. So this should be actually driving the core network to a situation where there will be a smaller number of vendors and clearly this is one of our strengths and we are starting to see this in the recent deal momentum.”

Nokia continues to slash jobs Nokia also continues to move aggressively in slashing jobs in an attempt to cut operating costs.

Lundmark said the vendor ended the first half of this year with just under 80,000 employees, which means it has cut around 6,000 jobs this year. Nokia remains on track to slash between 3,000 and 8,000 more jobs over the next 18 months tied to a corporate restructuring program announced last October.

The cuts are targeted at saving up to $1.3 billion in operational costs by 2026, which Nokia stated would be a 10% to 15% drop in personnel expenses. The job cuts are set to impact Nokia’s Mobile Networks, Cloud and Network Services, and corporate functions.

Lundmark added that the remaining job cuts could be tied to how the vendor’s fortunes play out over the next several quarters.

“When we started the program, we did not expect to be under 80,000 employees by the end of Q2. So we have executed extremely quickly,” Lundmark said. “Where we are going to go from here after this acceleration, we'll be following very carefully now the pace of the market recovery. And it's clear that if that recovery is fast and if our market share development is good, then, of course, it's likely that we would end up closer to the upper end of that employee range. But we are kind of prepared, if needed, to go to the lower end of that range also should the market recovery be or continue to be very slow.”