Most of the attention these days for AT&T (
), Verizon (
), and Sprint (
) focuses on the mobile phone business and smart phone segment in
particular. For AT&T this attention is warranted as the mobile
service segment accounts for nearly half of our
, which is around 25% ahead of the current market price.
However, we highlight that the enterprise segment is another strong
area for AT&T that is getting a boost as companies start to
look increasingly at adding cloud-based services.
AT&T's Push for the Cloud
AT&T recently announced enhancements in its cloud services
which it sees as a major area of growth in the future. As
enterprises look to deploy more storage and services through cloud
based platforms, such as virtual private clouds for AT&T and
its customers, this segment will grow faster than other IT
Customers could move storage off site forgoing extensive
software and hardware needs, firms can create mobile applications
that its employees or customers use to enhance and improve services
and these services can provide certain security services for the a
company's network and information. One of the selling points to
customers is that this gives greater flexibility over their IT
budgets. The IDC estimates that cloud services market will grow
from $16 billion in 2009 to $55.5 billion in 2014. This directly
affects AT&T's enterprise revenues which have witnessed
declines in the past.
So how much is this move worth to AT&T?
We estimate that enterprise segment constitutes around 8% of
AT&T's price estimate and is thus not a great value
contributor. However its lower contribution is partially a result
from the declining trend that we have observed for quite sometime.
Below you can modify our forecast to see how improvement in
trends can increase the segment's value contribution and affect
AT&T's price estimate.
For example, rather than decline gradually as we currently
expect, if enterprise revenues stay flat at around $18 billion per
year, this chips in an additional 2% on the price estimate.
AT&T's Strong Ties in the Enterprise Segment are an
AT&T began its major push into cloud computing back in 2008
when it offered its 'AT&T Synaptic Hosting.' One of its first
customers was the U.S. Olympic committee. Before that, this field
was dominated by other big names like IBM, Google and Amazon.
The fact that AT&T already has experience in managing
networks and infrastructure allows it to offer these services to
existing enterprise customers. For instance, AT&T could
promote its cloud-based services along with other business services
products that its customers use. The relationships and sales
channels are in place already, and this would give AT&T another
source of revenue from existing clients. With these clients in
place, AT&T can use them as an example to promote its services
and attract new clients.
We believe AT&T is in a prime position to make further
inroads with cloud based services, which could provide additional
upside to our already rosy outlook for the company.
the complete $35.80 Trefis price estimate for