IBM Sells Global Network to AT&T in Strategic Partnership Deal

Strategic Insights -

AT&T has acquired IBM's Global Network in a deal that will see the two companies outsource chunks of their operations to each other, resulting in thousands of employees moving between the two companies. The partnership will allow AT&T to strengthen its global reach and increase its revenue by $2.5 billion in the first full year of operation. The deal is part of a series of agreements that will see AT&T outsource data center management and applications processing operations to IBM, with the two companies expecting the deal to close by mid-1999.

Key Takeaways:

  • IBM's Global Network, which serves several hundred large global companies, tens of thousands of mid-sized businesses, and over one million individual Internet users in 59 countries, has been sold to AT&T.
  • The deal includes the outsourcing of some of AT&T's applications processing and data center management operations to IBM, with more than 2,000 AT&T managers being offered jobs at IBM.
  • The partnership will provide AT&T with a significant portion of IBM's global networking requirements through an outsourcing contract valued at $5 billion over five years.
  • Over 5,000 IBM employees will move to AT&T as a result of the deal.
  • Gerstner said IBM began building the Global Network in the early 1980s to provide global data networking capabilities to its customers, but now feels that telecommunications companies are better equipped to handle this type of infrastructure.

Statistics:

  • The deal will add $2.5 billion to AT&T's revenue in the first full year of operation.
  • The outsourcing contract valued at $5 billion over five years will more than double the network outsourcing revenue of AT&T Solutions.
  • The partnership will cover 59 countries and serve several hundred large global companies, tens of thousands of mid-sized businesses, and over one million individual Internet users.

Sources:

  • SN 1747, 'IBM, AT&T Rev Up Strategic Alliance '. By Grant Buckler, Newsbytes, December 8, 1998.
  • Newsbytes News Network, http://www.newsbytes.com (19981208/Press Contact: Adele Ambrose, AT&T, 908-221-6900, e-mail aambrose@att.com; Rob Wilson, IBM, 914-499-6565, e-mail wilsonr@us.ibm.com; Eileen Connolly, AT&T, 908-221-6731, e-mail econnolly@att.com/WIRES BUSINESS, TELECOM/).