Nokia is to sell a majority stake in its video technology unit to Canadian investment firm Volaris, in effect following the divestment trend set earlier this year by close rival Ericsson.
The deal seems to cover Nokia Corp. (NYSE: NOK)'s entire video product portfolio, including its caching and streaming, origin and storage, and stream personalization technologies. It comes months after Ericsson AB (Nasdaq: ERIC) sold a 51% stake in its media solutions business to a private equity firm called One Equity Partners: that business has now been rebranded as MediaKind. (See Ericsson Rebadges Media Unit, Eyes Smart Cities, M&A.)
Like Ericsson, Nokia is not disclosing the the financial terms of the arrangement. But it has indicated that the majority of its IP video business employees will transfer to a new Volaris subsidiary carrying the Velocix brand, which Volaris plans to run as an independent unit within its communications and media portfolio.
The Finnish vendor says it will act as a channel partner for Velocix, selling and offering support for that company's video solutions.
The name Velocix will sound very familiar to many: It is the name of a deep packet inspection (DPI) and content delivery networking (CDN) specialist that was acquired by Alcatel-Lucent (now Nokia) in 2009 and which underpinned Nokia's video platform developments in recent years. (See AlcaLu Buys CDN Specialist Velocix and Sky Deploys Nokia's Velocix.)
Despite the divestment, Nokia has been emphasizing how important video continues to be for customers and has pointed out that it will continue to maintain its video integration business so that it can provide support to existing clients.
"Video plays a very important role in our customers' strategies, both as it relates to their services and the demands it places on their networks," said Basil Alwan, the head of Nokia's IP and optical networks business, in a statement on the deal. "Meanwhile, the technology behind video -- including user experience, content packaging and delivery -- continues to go through meaningful shifts. Our new partnership enables us to adapt and grow in this important period; together we can better navigate change while providing continuity for our customers."
Unlike Ericsson, Nokia has not traditionally broken out details of revenues from video products. Its entire IP and optical networks business delivered sales of about €1.3 billion ($1.5 billion) in the recent second quarter, about a quarter of total group sales. Nokia reported a sharp year-on-year decline in sales of IP routing products but impressive gains at the optical networks unit. Sales at its small software business grew 2% on a constant currency basis. (See Profits Crash at Nokia's Networks Biz.)
The sale of Ericsson's video assets in January was a much higher-profile deal and one the industry had anticipated after CEO Börje Ekholm said he would double down on the core networks business as part of a new strategy. (See Ericsson Stuck in Loss-Making Rut, Offloads Majority Stake in Media Unit.)
In July, Ericsson revealed that its media solutions business, in which it is retaining a minority stake, would be renamed MediaKind. Executives at a press event acknowledged that former acquisitions such as Tandberg TV and Mediaroom had not properly been integrated into the business and that staff numbers had been declining in the preceding year. (See Ericsson Rebadges Media Unit, Eyes Smart Cities, M&A.)
As Light Reading noted at the time, when media solutions was last included in Ericsson's detailed financial reporting, in the first quarter of 2017, it made 1.96 billion Swedish kroner ($220 million) in sales, down 20% year-on-year, and was losing nearly as much money as it was bringing in.
Ericsson and Nokia are not the only network equipment vendors that have been flogging video assets this year. In May, Cisco Systems Inc. (Nasdaq: CSCO) sold its Service Provider Video Software Solutions (SPVSS) business to a private equity firm called Permira.
SPVSS is effectively the NDS business that Cisco acquired for about $5 billion in 2012. As with Ericsson and Nokia, Cisco has not disclosed the financial terms of its latest deal, although press reports have suggested it is selling the business for much less than it originally paid. (See Cisco Dumps Video Software Biz, Ends NDS Era and Bye Bye Cisco Video Software, Hello Synamedia.)
Nokia expects to close its deal with Volaris in the fourth quarter of the current fiscal year.
— Iain Morris, International Editor, Light Reading