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AT&T's Latest Buyout to Boost its SD-WAN and White Box Suite

Zacks Equity Research

U.S. telecom behemoth AT&T Inc. T has unveiled its plans to purchase the Vyatta network operating system and associated assets of Brocade Communications Systems Inc. BRCD. Brocade’s Vyatta platform includes the vRouter product line. As part of the deal, AT&T is also interested in hiring some of Brocade’s employees associated with Vyatta business.

The deal is expected to close early this summer and is subject to closing conditions and prior to the completion of the previously announced proposed acquisition of Brocade by Broadcom Limited. However, AT&T and Brocade did not disclose the financial terms of the deal.

On completion of this deal, AT&T will own the Vyatta network operating system, including its virtual network functions (VNFs) and distributed services platform, software under development as part of its unreleased roadmap, existing software licenses, and related patents and patent applications. The Brocade employees who will be joining AT&T are mostly located in California and the UK.

The Expected Synergies

If the proposed acquisition goes through, then it willexpand AT&T’s SD-WAN and white box capabilities for business customers. The buyout will enable the company to deliver cloud or premises-based VNFs (virtualized network functions) in connection with AT&T Software-defined Wide Area Network (SD-WAN) cloud service with VeloCloud.

The Vyatta platform will also help AT&T in its network transformation which allows addition of new features in less time and cost. With a target achievement of 55% by the end of 2017, AT&T is expected to virtualize and software-control 75% of its network by 2020.

Price Performance and Zacks Rank

Over the past three months, share price of AT&T declined 7.44% compared with the Zacks categorized Wireless National industry’s fall of 5.22%.

Currently, AT&T is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Latest Updates on SD-WAN

On Jun 1, 2017,U.S. telecom behemoth, Verizon Communications Inc. VZ has inked a managed services deal with Ericsson ERIC wherein Ericsson will be deploying Verizon's Managed Software Defined Wide Area Network (SD WAN) for its corporate IT, including virtualized security services and Managed Enterprise Radio Access Network (E-RAN) solutions. This should help Ericsson in the transformation of its corporate IT environment toward a virtual services implementation.

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