Why Is Nokia Acquiring Gainspeed?

+15.43%
Upside
3.48
Market
4.02
Trefis
NOK: Nokia logo
NOK
Nokia

Recently Nokia (NYSE:NOK)   announced that it will be acquiring Gainspeed, a US-based start-up specializing in DAA (Distributed Access Architecture) solutions for the cable industry via its Virtual CCAP (Converged Cable Access Platform) product line. Gainspeed is widely regarded as the industry leader in DAA, which the cable industry has adopted as its next generation solution to address increasing capacity requirements. Through this acquisition, Nokia is looking to diversify its product portfolio for cable access customers and expand its footprint in this market. As cable operators work towards upgrading their infrastructure to compete better with telecom companies, Gainspeed will equip Nokia to meet this demand from the cable industry and provide growth opportunities to its networks segment.

See our complete analysis for Nokia stock here

Relevant Articles
  1. Is Nokia Stock A Buy At $4?
  2. Nokia Stock Looks Undervalued At $4
  3. Nokia Stock Poised For Recovery After Dismal Week?
  4. Nokia Stock Looks Set For Rally After Rough Month
  5. Can Nokia Stock Continue Weathering The Storm In The Broader Markets?
  6. Can Nokia Stock Continue Its Post-Earnings Outperformance?

Services For Fixed Broadband Providers Critical For Vendors

According to research company Strategy Analytics, fixed broadband is continuing to grow in the U.S. and not being replaced by mobile broadband. While 3.3 million new broadband subscribers were added in the U.S. between April 2015 to March 2016, cable controls 62% of broadband subscriptions. Cable operators are upgrading their infrastructure and making investments in Wi-Fi to better compete for quad play customers. Experts believe that distinguishing between the capabilities of transforming traditional telecom and cable providers based on service portfolios has become problematic and the roadmap for next generation communications architectures has become almost identical. Vendors of next generation communications infrastructure need to meet the needs of the broad landscape of service providers and through the acquisition of Gainspeed, Nokia is filling this missing gap and expanding its footprint in the cable industry.

Gainspeed’s virtual CCAP solution enables cable operators to meet growing customer demand for high-speed data services and IP video. With Virtual CCAP, cable operators can increase the capacity of their existing HFC (Hybrid Fiber Coax) infrastructure and rapidly deploy new services, while simultaneously reducing space and power requirements in the so-called headend, where sattelite signals are aggregated for distribution through the network. At the same time, customers can cost-effectively migrate their networks to a software-driven, all-IP architecture. With the acquistion of Gainspeed, Nokia would have an extendible and flexible platform that can host the future innovations of the cable industry.

As per our estimates, the networks segment accounts for nearly 30% of Nokia’s valuation and is primarily driven by Nokia’s wireless market share. We expect the wireless infrastructure market to remain stagnant going forward and Nokia to maintain its nearly 15% share in this market.

However, diversification into the fixed networks space through acquisition of Gainspeed can provide growth opportunities for Nokia as cable operators aggressively work towards upgrading their infrastructure. We believe there is a significant untapped opportunity in this segment which Nokia can now access with the acquisition of Gainspeed. As Nokia looks to establish itself as a strong player in the networks segment, augmenting the wireless network segment with fixed network services and providing technology support to cable operators should strategically position Nokia as a key player in this segment.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap
More Trefis Research