Microsoft's (MSFT) acquisition of Affirmed Networks might seem out of left field for the software giant, but it's a move to expand its cloud-computing expertise into the coming generation of 5G wireless networks. Microsoft stock fell Friday during an overall down day for the stock market.
↑ X NOW PLAYING Stock Market News: U.S. Coronavirus Cases Climb, House To Vote On Stimulus, Tesla Cuts Nevada Gigafactory StaffRedmond, Wash.-based Microsoft announced Thursday that it is buying privately held Affirmed Networks. Acton, Mass.-based Affirmed provides cloud-based networking solutions for telecom companies. Microsoft did not reveal the deal value, but sources told Bloomberg it was about $1.35 billion.
"This acquisition will allow us to evolve our work with the telecommunications industry, building on our secure and trusted cloud platform for operators," Yousef Khalidi, corporate vice president of Microsoft's Azure networking business, said in a blog post. "With Affirmed Networks, we will be able to offer new and innovative solutions tailored to the unique needs of operators, including managing their network workloads in the cloud."
Rosenblatt Securities analyst Ryan Koontz said Microsoft's acquisition of Affirmed is a "competitive attack" on VMware (VMW). In a note to clients, Koontz said VMware "has invested very heavily in recent years in building its carrier virtualization product, services, and go-to-market portfolio targeting telco private cloud."
Microsoft Stock Shows Relative StrengthAt first glance, Microsoft's Affirmed acquisition is a "head-scratcher," Koontz said. It's not an obvious fit with the Azure business, but it could shape the market for years to come, he said.
On the stock market today, Microsoft stock sank 4.1% to 149.70. It has held up better than most stocks during the coronavirus stock market crash. Microsoft stock has an IBD Relative Strength Rating of 94. That means it has outperformed 94% of stocks over the past 12 months.
Microsoft stock has an IBD Composite Rating of 98 out of a best-possible 99, according to the IBD Stock Checkup tool. The Composite Rating scores a stock's key fundamental and technical metrics against all other stocks regardless of industry group.
Microsoft Gains Edge On Amazon Web ServicesMicrosoft's cloud-computing rival Amazon Web Services tested the market for telco network functions virtualization in recent years. But Amazon's (AMZN) AWS appears to have stepped back, Koontz said.
"Should Microsoft further build out its carrier NFV portfolio of products, services, and go-to-market through acquisitions and partnerships, we see a meaningful opportunity for them to gain the leading role in carrier virtualization, which remains up for grabs," Koontz said.
Koontz said he is surprised that Juniper Networks (JNPR) or Nokia (NOK) didn't buy Affirmed instead.
Microsoft strategic partner AT&T (T) likely pushed it to acquire Affirmed, Koontz said.
Microsoft stock is in the IBD Long-Term Leaders Portfolio.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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