Nokia Corporation NOK recently secured a multi-year agreement for an undisclosed amount from AT&T Inc. T to help modernize the fiber infrastructure of the telecom carrier. Per the five-year deal, Nokia will deploy its Lightspan MF and Altiplano platforms to develop state-of-the-art networks to cater to the growing demand for more capacity and enhanced broadband services.

What Tilted the Scales for NOK?

Nokia has made significant progress on its three-phased journey of value creation: Reset, Accelerate and Scale. Its focus on capital allocation and technology leadership is expected to help it grow profitably. Nokia is on track to achieve sustainable, profitable growth and technology leadership by accelerating its product roadmap and cost competitiveness through additional 5G investments. The 5G portfolio is gaining traction among enterprise customers. Nokia currently has 319 commercial 5G deals with communications service providers globally. It has 110 live 5G networks, both public and private. 

To strengthen its leading position in the market, Nokia facilitates its customers to move away from an economy-of-scale network operating model to demand-driven operations by offering easy programmability and flexible automation needed to support dynamic operations, reduce complexity and improve efficiency. The company seeks to expand its business into targeted, high-growth and high-margin vertical markets to address growth opportunities beyond its traditional primary markets.

Tables Turn for NOK After an Earlier Snub

In December 2023, AT&T inked a five-year contract worth about $14 billion with Ericsson ERIC to modernize its network infrastructure. The deal aimed to replace Nokia, which once accounted for one-third of AT&T’s business, as one of the leading vendors of the carrier. 

AT&T intends to leverage Ericsson technology to deploy commercial-scale Open Radio Access Network (O-RAN) across the country to help build a more robust ecosystem of network infrastructure providers and suppliers. The Open RAN architecture facilitates healthy competition among vendors for the supply of essential components and reduces dependence on a single manufacturer. It is likely to offer more flexibility, lower costs and help develop novel ideas to monetize the network. In addition, it will thwart security risks by avoiding reliance on non-U.S. vendors such as Huawei Technologies Co.

Despite an earlier snub, Nokia has gained significant traction with its fiber products and is increasingly benefiting from copper and fiber deployments of passive optical networking. Its C-Band portfolio supports 5G standalone and non-standalone networks, cloud-based implementations and O-RAN products. Its installed base of high-capacity AirScale products, which enables customers to quickly upgrade to 5G, is growing fast.

Will NOK Stock Benefit in the Long Run?

Nokia is driving the transition of global enterprises into smart virtual networks by creating a single network for all services, converging mobile and fixed broadband, IP routing and optical networks with the software and services to manage them. Leveraging state-of-the-art technology, Nokia is transforming the way people and things communicate and connect. These include a seamless transition to 5G technology, ultra-broadband access, IP and Software Defined Networking, cloud applications and the Internet of Things.

Nokia has emerged as one of the leading players in the development of advanced 5G technology and is at the forefront of extending 5G use cases in various industries. It has laid a strong foundation of innovation through substantial infrastructure investments. This has led to the establishment of an impressive portfolio comprising approximately 20,000 patent families, including more than 6,000 patent families that are deemed crucial to 5G technology. The AT&T deal is likely to propel the stock with incremental revenue generation and inducement of similar deals from other carriers in the future.

The stock has gained 24.5% over the past six months compared with the industry’s growth of 16.4%.

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NOK Zacks Rank & Stock to Consider

Nokia currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arista Networks, Inc. ANET, carrying a Zacks Rank #2 (Buy) 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 experiences. Arista has a long-term earnings growth expectation of 17.2% and delivered an earnings surprise of 15%, on average, in the trailing four quarters.

It holds a leadership position in 100-gigabit Ethernet switching share in port for the high-speed data center segment. Arista is increasingly gaining market traction in 200 and 400-gig high-performance switching products. It is well-positioned for healthy growth in data-driven cloud networking business with proactive platforms and predictive operations.

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