AT&T has agreed to buy IBM's global communications network for $5 billion (£3.4 billion) in cash, the companies announced on Tuesday, a move that will allow the US's largest phone company to expand its data services for businesses.
IBM's network transports information and provides access to the Internet. The Armonk, New York-based computer giant had been actively seeking a buyer for the unit, and had hired Merrill Lynch to conduct a search this autumn.
The $5 billion that AT&T paid exceeded most estimates of what the unit could fetch. "The consensus was that it was worth between $3 and $4 billion," said Ms Megan Graham-Hackett, a computer hardware and networking analyst for the S&P Equity group. Still, "even if the price was on the high side, it fits so perfectly for AT&T," she said, a view echoed by other analysts.
AT&T chief executive Mr Michael Armstrong, formerly a senior IBM executive, has sought to expand his company's data service business, especially on networks that use Internet Protocol ("IP") standards.
"In the arena of IP, we have truthfully not been market leaders," said Mr Dan Somers, AT&T's chief financial officer. "In terms of our capability to deliver service levels to our customers, we were a distant third or fourth." Indeed, even with the IBM acquisition, industry analysts consider AT&T to be well behind competitors - namely MCI/WorldCom - in its IP capability. "But this at least gives us a little competition in the marketplace," Mr Somers said.
