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Microsoft (MSFT) to Buy Metaswitch, Steps Up Edge Computing

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Microsoft MSFT recently entered into an agreement to acquire 5G specialist Metaswitch Networks.

The acquisition will strengthen the company’s cloud offerings by leveraging Metaswitch’s portfolio of cloud-native services that include 5G voice, data and communications solutions for telecommunication companies. Nevertheless, the financial terms of the deal have been kept under wraps.

Microsoft’s cloud platform — Azure — will be utilized to scale and deploy Metaswitch’s software solutions. However, Microsoft has stated that it will continue to maintain its hybrid and multi-cloud models, which indicates that Metaswitch’s solutions will be available on other cloud platforms as well.

Shares of Microsoft have returned 14.5% in the year-to-date period compared with the industry’s rise of 7%.

Microsoft Corporation Price and Consensus

Microsoft Corporation Price and Consensus

Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote


Efforts to Strengthen 5G Edge Computing Capabilities

Metaswitch’s acquisition has positioned Microsoft to capitalize on the accelerated deployment of 5G and gain robust traction among telecom customers. Markedly, Metaswitch boasts a strong client base that comprises major tech players like Atos, Cisco and Dell, among others.

Moreover, the company has stated that Metaswitch’s solutions are complementary with Affirmed and will thus provide Microsoft with cross-selling opportunities between both acquired companies.

Recently, the company acquired Affirmed Networks to gain access to the latter’s fully virtualized, cloud-native 5G core and mobile edge computing offerings. The buyout is expected to strengthen Microsoft’s telecom focused cloud solutions.

Microsoft also partnered with AT&T to accelerate innovation for new 5G, cloud, and edge computing solutions. AT&T’s domestic 5G capabilities combined with Azure’s cloud computing expertise will help them develop robust solutions for their mutual customers.

Additionally, the transition to 5G is forcing telecom operators to ditch their legacy systems in favor of cloud based solutions. As a result, Microsoft’s expanding portfolio of cloud solutions bodes well for its prospects.

Further, social distancing and work-from-home trends stemming from the COVID-19 outbreak is driving demand for high-speed connectivity and networking at the edge. This is expected to boost adoption of Microsoft’s solutions among telecom carriers and other network communication players.

Competitive Scenario

Microsoft’s cloud peers, including Amazon AMZN and IBM IBM aren’t far behind when it comes to strengthening their footprint in the growing edge computing market, backed by 5G transition. Per data by Grand View Research, the global edge computing space is expected to reach $43.4 billion by 2027 at a CAGR of 37.4%.

Recently, IBM announced it is leveraging Red Hat’s OpenShift platform to develop solutions like IBM Telco Network Cloud Manager, which will aid telecom operators in modernizing their networks and improve efficiency. Notably, IBM’s solutions have already been adopted by Bharti Airtel to build its open cloud network to support 5G operations in India.

IBM is also collaborating with Samsung and telecom operator M1 to develop and test Industry 4.0 solutions using 5G and edge computing for Singapore's Infocomm Media Development Authority (IMDA).

Notably, Amazon’s cloud computing division Amazon Web Service (AWS) introduced AWS Wavelength, which combines AWS compute and storage with a 5G network to improve the efficiency of infrastructure deployment. Moreover, by placing resources at the edge of the network, the solution will be able to reduce latency significantly.

In March, Alphabet’s GOOGL Google Cloud announced a new strategy to aid telecom companies in monetizing their 5G network services, by leveraging the edge computing capabilities of the Google Cloud platform.

Markedly, Google Cloud has partnered with AT&T to build a portfolio of low latency 5G edge computing solutions for companies across industries like retail, manufacturing and transportation.

Nevertheless, Microsoft’s deep focus toward strengthening cloud offerings is likely to strengthen its market position in the edge computing market on the back of latest efforts in the sapce.

Zacks Rank

Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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