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AT&T (T) Completes Vyatta Buyout, Boosts SD-WAN Portfolio

Zacks Equity Research

On Jul 7, U.S. telecom behemoth, AT&T Inc. T, completed the acquisition of 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 hired some of Brocade’s employees associated with Vyatta business.

On completion of this deal, AT&T will own the Vyatta network operating system, including its virtual network functions (VNFs), distributed services platform and 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 will be posted at California and the U.K.

One of the company’s primary moves is the hiring of employees and training current staff in software-defined networking, security, data analytics and other new technologies.

On a similar note, U.S. telecom behemoth Verizon Communications Inc. VZ recently inked a managed services deal with Ericsson ERIC. Under the deal, 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.

Expected Synergies

This deal will expand 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 help AT&T in its network transformation drive, allowing addition of new features in less time and cost. With a target achievement of 55% by the end of 2017, the company 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 8.26% compared with the Zacks categorized Wireless National industry’s fall of 8.50%.

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.

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Brocade Communications Systems, Inc. (BRCD) : Free Stock Analysis Report
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