Per Reuters, Vodafone Group Plc (VOD - Free Report) has entered into an eight-year managed-services agreement with International Business Machines Corporation (IBM - Free Report) to jointly develop digital solutions around cloud and connectivity in Europe. This new venture will work independently out of London and is expected to be operational in the first half of 2019. Following the news, Vodafone’s equity price increased 0.57% during the trading session to eventually close at $19.30 on Jan 18.
Presently, Europe’s cloud market is dominated by leading U.S. players putting it far behind in the race for next-generation technologies. This collaboration will likely boost Europe’s foothold in developing markets such as cloud computing and 5G, among others.
Per the contract, Vodafone will pay $550 million to IBM as the latter will provide solutions such as artificial intelligence (AI) and automation to its networked businesses. The venture will allow Vodafone to access all of IBM’s cloud services. Also, Vodafone will provide mobile infrastructure like 5G to IBM.
The combination of Vodafone’s network with IBM’s cloud offerings will provide enterprise customers of the former a more efficient connection between their cloud environments and devices. The venture will focus on Vodafone’s British, German and Irish markets, targeting big enterprise customers operating in varied industries including retail, manufacturing and utilities.
The Newbury, U.K.-based telecom operator boasts a robust position in mobile services for enterprise and is stepping up its battle against Telecom Italia S.p.A. (TI - Free Report) and Telefónica, S.A. (TEF - Free Report) in the fixed-line business market. It intends to accelerate business service revenues, which currently accounts for 30% of its total revenues, by uniting fixed-line and mobile services with latest technology in areas such as AI and Internet of Things.
However, Vodafone's shares have recorded an average loss of 1.4% against growth of 2.8% for the industry over the past three months. It is to be seen whether such extended commercial collaborations can help the company improve its profitability in 2019 by supporting its top line.
Vodafone currently has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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