Microsoft (MSFT) Inks Deal To Acquire Affirmed Networks

Microsoft (NYSE:T) recently announced that it has entered into an agreement to acquire Affirmed Networks with an aim to gain advanced software and 5G edge computing capabilities to deliver enhanced cloud experience.

However, the financial terms of the deal have been kept under wraps. Notably, per Crunchbase data, Affirmed Networks raised around $155 million in funding as a private entity.

Notably, Acton, MA-based Affirmed Networks offers fully virtualized, cloud-native 5G core and mobile edge computing offerings. The solutions enable operators in managing data traffic, streamlining network operations and introducing new services.

Founded in 2010, the privately held venture capital-funded company boasts of a notable customer base comprising major telecom players, including AT&T (NYSE:T) and Vodafone (LON:VOD), that utilize its 5G edge computing solutions.

We believe Microsoft Azure is well poised to gain strong momentum across telecom customers with the latest acquisition, amid accelerated deployment of 5G.

Latest Deal to Boost Azure’s 5G Edge Computing Capabilities

The latest buyout is anticipated to aid Azure in providing customers with robust 5G edge computing offerings, which is the need of the hour. Markedly, the coronavirus crisis has led to a wave of de-globalization, wherein enterprises are asking employees to work from home. This trend of self-isolation and social distancing is driving the demand for networking at the edge and data center.

The deal is expected to generate incremental adoption of Azure among telecom companies, which is expected to instill confidence in the stock, currently carrying a Zacks Rank #2 (Buy). Notably, shares of the company have returned 33.5% in the past year, outperforming the industry’s rally of 16.1%.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Affirmed Networks acquisition will enhance the company’s cloud services portfolio, which in turn is expected to sustain its cloud business performance in the near term.

Notably, Intelligent Cloud segment reported revenues of $11.87 billion, up 28% at constant currency year over year, in second-quarter fiscal 2020. Further, Azure's revenues surged 64% year over year at constant currency.

Microsoft to Gain Competitive Edge in Cloud Market

With the latest move, Microsoft is expected to strengthen its competitive position against Alphabet’s (NASDAQ:GOOGL) Google Cloud and Amazon (NASDAQ:AMZN) in the cloud computing market.

Notably, both Alphabet and Amazon are leaving no stone unturned to deliver enhanced low-latency experience to cloud customers via 5G network, to augment competitive prowess in the space.

Google Cloud rolled out Anthos for Telecom solution in early March, with an aim to enhance its presence in the 5G edge computing space.

Moreover, strategic alliance with AT&T is noteworthy. Google Cloud aims to leverage AT&T’s 5G network to build a suite of business products which will offer low latency and strong security to the companies.

Meanwhile, Amazon Web Services (AWS) unveiled AWS Wavelength, which is a combination of AWS compute and storage services and cutting edge 5G networks.

Further, the company has joined forces with Verizon (NYSE:VZ) in order to leverage the latter’s 5G networks in order to develop applications serving use-cases with single-digit millisecond latencies.

Moreover, this partnership will aid Amazon in making AWS Wavelength available across the United States. Additionally, the company has teamed up with Vodafone, SK Telecom, and KDDI to make the service available in Europe, South Korea, and Japan by 2020.

Nevertheless, Microsoft’s deepening focus toward strengthening cloud offerings is likely to strengthen its market position in the cloud computing market.

Markedly, Microsoft Azure’s market share increased from 14.5% in fourth-quarter 2018, to 17.6% in fourth-quarter 2019, per a report by Canalys. Notably, Azure trails only Amazon Web Services, which is losing ground in the cloud infrastructure market. This is evident from AWS’ market share of 32.4% in fourth-quarter 2019, shrinking from 33.4% in the prior-year quarter.

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