Market Insight

Another Day, Another Divestment: Nokia Offloads Video Assets

September 13, 2018  | Subscribers Only

Merrick Kingston Merrick Kingston Associate Director, Research & Analysis, Digital Media & Video Technology

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Nokia has sold the brunt its digital video business – comprising the firm’s CDN, Cloud DVR, and experience personalization solutions – to Canadian private equity firm Volaris Group. Volaris is likely to reconstitute the video assets under the Velocix brand. Nokia, for its part, will retain its system integration business, but will continue to market and sell Velocix’s solutions – becoming, in effect, a Velocix channel partner.  The value of the transaction is not known.

Our analysis

Tis the season for divestment. Nokia, alongside Cisco and Ericsson, is the third network infrastructure incumbent to have offloaded its video assets during calendar-year 2018; Huawei and ZTE remain the only major networking vendors in possession of digital video businesses. 

For Nokia, the divestment is simply a means of refocusing on its core business: the sale of fixed-and-mobile broadband infrastructure, integration services, virtualization technology, and OSS/BSS support systems. The Velocix assets are neither unprofitable, nor a revenue drain; they are merely an irrelevance. We estimate that the Velocix business has generated on the order of USD 35m for the past few years. The assets do not contribute materially or strategically to Nokia’s wider, USD 26b enterprise.

For the industry as a whole, recent divestments have provoked a reallocation of capital that may alter where – and how often – technology innovation takes place. Historically, incumbent video-solution providers have been publicly held, and have relied upon acquisition to enlarge the breadth of their solutions. The incumbents’ shift into the hands of private, more patient capital has the potential, over time, to catalyze in-house investment and development.

The video technology industry will continue to germinate nimble, innovative, privately-held startups. And on balance, firms such as Velocix, MediaKind (nee Ericsson), and Synamedia (nee Cisco) will not reflexively consider in-house R&D – regardless of circumstance – to be a competitive best-response. We nonetheless believe that the incumbents’ engineering capacity, coupled with the industry’s re-alignment around private ownership, will foster marginal changes in technology development, and over time, will incrementally re-align the competitive landscape.

Organization
Cisco Ericsson Huawei Nokia ZTE
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