AT&T is negotiating to buy IBM's Global Network business, an AT&T executive said Wednesday, a move that could help it gain ground in the lucrative corporate network services industry.
Rick Roscitt, president of AT&T's Solutions unit, confirmed the negotiations at a joint press conference to announce a US$1.8 billion contract between AT&T and International Business Machines to provide networking and computer services to Banc One. He declined to give details.
"We're interested," said Roscitt. "[But] it is so premature now, and we are in [such] early stages of that conversation that it is not fruitful to have a lot more to say about it."
IBM's Global Network unit would be a strategic asset for AT&T (T), giving the telephone company access to IBM's base of 45,000 corporate customers, analysts said. Buying the IBM (IBM) business would also eliminate some competition for a recently launched joint venture between AT&T and British Telecommunications (BTY), which provides similar network management and data and voice communications services to multinational corporations.
"AT&T's global presence is somewhat limited in terms of physical facilities, particularly in contrast to MCI WorldCom," said Bob Wilkes, an analyst with Brown Brothers Harriman. "This is a network that would give AT&T a facilities-based presence where it otherwise wouldn't have one, and would connect the company to the types of customers it's after."
But some analysts question the current condition of IBM's network, and say that the cost of any upgrades AT&T may have to make could be an issue. That's one reason why the price AT&T pays would ultimately determine the soundness of the potential agreement. IBM reportedly is seeking between $3 billion and $4 billion for the Global Network.
Earlier this month, IBM confirmed that it was looking for a buyer for the Global Network business, so it could focus more on its core hardware and software operations. Before the rise of the Internet, the Global Network was a successful side operation, serving corporations that needed to wire together their operations, but didn't want to build and manage a private network.
