Oppenheimer Says These 4 Names Will Benefit From 'Cloud Convergence'
In a report published Tuesday, Oppenheimer analysts mentioned that Internet companies are aiming for more vertical integration of communications and cloud infrastructure. In the course of time, these companies would offer "a fully integrated suite of applications to control the customer relationship."
In the report Oppenheimer noted, "Currently the carriers control the customer relationships and critical last-mile infrastructure. Carriers will need to invest in new virtualized and a dozen other technologies to retain this leadership. Luckily these investments should leverage existing infrastructure and dramatically lower costs from an automated network and end-user experience. Regardless, companies with unique infrastructure—spectrum, towers, fiber, carrier-neutral datacenters, and managed service—are well positioned."
This trend of vertical integration can be observed in both the consumer and the enterprise markets. Google Inc (NASDAQ: GOOG) seems to want to "dominate every aspect of consumers' daily life."
Google is likely to be aiming at creating a fully integrated, low-cost wireless/ cloud service. A couple of weeks back, Google announced its entry into the wireless market as an MVNO after expanding its fiber rollout.
Although tablets made the foray, smartphone may be "the primary integrator of this converged world," the analysts wrote. These devices could begin cannibalizing paid TV.
"The cloud is the nexus for this real-time communications and computing, something that has never occurred before. There will clearly be standalone applications like Uber and Netflix, but the ability to integrate these applications into an intelligent bundle will be a huge competitive advantage," the report said.
The infrastructure of telecom companies appears highly undervalued, "but this needs to be managed under a better capital structure," the analysts mentioned, while naming T-Mobile US, Inc (NASDAQ: TMUS), Equinix, Inc (NASDAQ: EQIX), Cogent Communications Holdings, Inc (NASDAQ: CCOI) and Akamai Technologies, Inc (NASDAQ: AKAM) as the main beneficiaries of this network transformation.
"We believe that mobility is the primary driver of this convergence; TMUS has considerable M&A and can leverage its spectrum, and AKAM/EQIX can efficiently deliver traffic," the analysts explained.
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