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Microsoft, Watch Communications to Offer Broadband Solutions

Zacks Equity Research

Microsoft MSFT recently entered into a strategic partnership with Watch Communications,an Internet Service Provider. The companies have teamed up to offer cost-effective broadband Internet services in rural areas of three states — Indiana, Illinois and Ohio. This includes more than 808,000 “unserved” rural people.

The partnership is a step in the direction of bridging this immense gap by providing affordable broadband connectivity. By 2022, the deal will provide broadband to three million people in rural America.

Internet is an intrinsic part of day-to-day functioning in the 21st century and consequently access to the service forms the very crux of this data-driven world. However, per FCC reports, more than 21 million people in America do not have the rights to use broadband Internet. Further, per the press release, roughly 162 million people living in United States (which includes 17 million people in Indiana, Illinois and Ohio), lack access to broadband Internet speed.

Watch Communications will develop and market wireless internet access networks solutions using TV white spaces (TVWS) offering.  The strategic deal is part of the tech giant’s Airband Initiative. This initiative seeks to augment broadband coverage leveraging various technologies comprising the innovative TVWS, among others.

TVWS generates broadband connections in ultra-high frequency (UHF) bands. The technology makes communication easier and secure despite challenging rural conditions. As part of Airband Initiative, Microsoft partners with Internet service providers to provide innovative solutions that enhance rural connectivity. Under the initiative, digital skill training is also imparted to people.

Coming to price performance, shares of Microsoft have returned 32.3% in a year’s time, outperforming the industry’s rally of 25.1%.

What the Investors Need to Know?

In an effort to expand penetration into smaller markets at different levels, increasing participation of rural population in the digital economy becomes a necessity. Moreover, per Boston Consulting Group data, a robust cost-effective connectivity model can be developed by leveraging TVWS tech combined with other technologies.

In this era of digitization, where more and more people leverage internet services for their respective purposes, this partnership holds promise.

Per a MarketsandMarkets report, the global TVWS spectrum market was is envisioned to witness a CAGR of whopping 74.3% to reach approximately $53.1 million by 2022 from $1.2 million in 2015. As a result, the partnership to deliver broadband connections powered by TVWS tech bodes well in the longer haul.

Our Take

The rural pockets bereft of Internet connectivity can benefit a great deal from the solution. As a result, businesses including the likes of education, agriculture and telemedicine are likely to develop and prosper. Backed by these factors, Microsoft will expand market reach and explore emerging ventures, which in turn will provide a boost to the economy.

Zacks Rank & Key Picks

Microsoft currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks worth considering in the broader sector are HubSpot HUBS, Alteryx AYX and Rosetta Stone RST, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for HubSpot, Alteryx and Rosetta Stone is pegged at 47.8%, 13.7% and 12.5%, respectively.

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