AT&T, IBM Seal Internet Deal
AT&T said Tuesday it's buying IBM's Global Network business for $5 billion in cash.
IBM (IBM) will outsource "a significant portion" of its global networking needs to AT&T (T) and Ma Bell will outsource some processing and data center management services to Big Blue as part of the deal.
The transactions could deliver $2.5 billion in additional revenue to AT&T in the first full year of operation, the company said in a press release.Shares of AT&T rose 2 7/16 to 67 3/16 Tuesday morning. IBM gained 1 1/8 to 168 5/16.
The IBM Global Network business that AT&T is buying provides networking to several hundred global companies, tens of thousands of mid-sized businesses and more than one million individual Internet users in 59 countries.
About 5,000 IBM employees will join AT&T as part of the acquisition."These strategic agreements are all about growth; growth in revenue, growth in technology, and, most important, growth in what AT&T can do for customers," AT&T Chairman and CEO C. Michael Armstrong said in a statement.
AT&T has targeted global services, data networking, Internet Protocol technology and network outsourcing for growth, the company said.
The acquisitio will "accelerate our ability to deliver IP-based services to global customers," Armstrong said.
IBM will manage AT&T's computers that support its long-distance services for business customers for $4 billion over 10 years. As a result, more than 2,000 AT&T employees will be offered jobs at IBM.
In addition, AT&T will manage the communications needed by IBM for its business customers for $5 billion over five years.
Tuesday's deal, which has been rumored for months, aids AT&T's goal to become a dominant provider of communications that use Internet technology to transmit data. In addition to giving AT&T a strong presence in the United States, the deal bolsters AT&T's joint venture with British Telecom, announced earlier this year, which aims to supply communications services to business customers across different nations.
For IBM, the sale enables it to focus on its strengths in selling computers and computer services.
IBM's network grew from a phone system linking its outposts into one of the world's largest communications systems. It transmits corporate data for about 30,000 customers in 50 countries.