AT&T and Intel Team Up in Big Network Virtualization Deal

att-t-logoFrom Zacks: Leading U.S. telecom operator AT&T Inc. (NYSE:T) and chipset manufacturer Intel Corporation (NASDAQ:INTC) announced its collaboration to develop new software-centric network technologies. This will aid AT&T in optimizing its Network for Functions Virtualization (NFV) capabilities for its AT&T Integrated Cloud (AIC) service.

Focus on Ethernet Market

As per Vertical System Group Ethernet rankings, AT&T tops the leaderboard in the U.S Ethernet market. Notably, its continuous investment and improvement in this space has enabled the telecom giant to emerge as a pioneer as well as gain a strong foothold in the Ethernet market.

Moreover, this collaboration with Intel will allow AT&T to provide new software-based network services and capabilities to its customers faster. The company is planning to run open source software on its hardware resources powered by Intel’s chip to enable virtualized network functions going ahead.

Network Virtualization – A New Trend

At present, cloud based functions are provided by Ethernet providers such as AT&T through a series of expensive dedicated hardware. Through new software-based network services and capabilities, any service provider can run its network functions on a less expensive hardware.

This will allow the Ethernet service providers to provide cloud based functions to their clients at much lesser cost thereby increasing margins in the process. AT&T is targeting in getting 30 percent of its network virtualized by the end of 2016, with a goal of reaching 75 percent by 2020.

The Bottom Line

AT&T is investing heavily to improve its cloud services and consolidate its position in the Ethernet market. However, the company is likely to face challenges from significant players such as Charter Communications Inc. (CHTRAnalyst Report) which has benefitted a lot from the fiber footprint it gained after its recent merger with Time Warner Cable. Moreover, CenturyLink Inc. (CTLAnalyst Report) too has been escalating its cloud capabilities of late.

AT&T INC Price

AT&T shares were mostly flat in premarket trading Tuesday at $40.86. T has gained nearly 19% since the start of 2016, more than doubling the S&P 500’s 7% rise in the same period.

This article is brought to you courtesy of Zacks Research.