Microsoft Corp (MSFT)

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Microsoft's Latest Acquisition Strengthens Its Edge Computing Push
By: TheStreet | March 26, 2020

• Microsoft's acquisition of Affirmed Networks should help it draw closer to telcos deploying 5G networks that rely heavily on commodity servers.

Like Intel (INTC) and Nvidia (NVDA), Microsoft sees an opportunity as some telcos build 5G networks that look very different from conventional mobile networks.

On Thursday, Microsoft (MSFT) announced that it’s buying Affirmed Networks. Affirmed provides a software platform that lets mobile carriers rely on off-the-shelf servers to handle various network functions -- a concept known as network functions virtualization, or NFV -- instead of having to purchase proprietary infrastructure gear from the likes of Nokia, Ericsson, Huawei and Cisco Systems.

The deal price is unknown. Affirmed has raised $155 million since it was founded in 2010, and a 2015 Forbes article indicated that the company was valued at $600 million in its most recent funding round up to that point in time.

Affirmed claims that its software has been deployed in more than 85 networks globally. Notable clients include major telcos such as AT&T (T) - Get Report, Vodafone (VOD), Canada’s Telus and the telco arm of Japan’s SoftBank (SFTBY).

Like other firms promoting NFV-based telco infrastructure solutions, Affirmed argues that its platform allows clients to buy cheaper hardware, cut operating expenses, deploy services more quickly and more easily scale their networks as traffic grows. For their parts, incumbents such as Nokia and Ericsson -- though offering NFV solutions -- have argued that their proprietary gear, which tends to rely heavily on ASICs and FPGAs for processing power, is more efficient at signal and packet-processing than commodity servers.

One other advantage to NFV-based infrastructures that likely matters a lot to Microsoft: Since the networks rely on regular servers, they can potentially handle many workloads besides moving telco network traffic around.

Microsoft has invested heavily in developing edge computing solutions for its Azure cloud platform that allow large amounts of data to be processed close to where it was created. Such offerings have appealed to retailers, manufacturers, municipal governments and other organizations that -- due to performance, reliability, cost and/or security/compliance concerns -- don’t want the data that their infrastructures produce traveling hundreds or thousands of miles to a major cloud data center.

As a result, Microsoft can use Affirmed’s software to help pitch mobile carriers on deploying NFV-based solutions that can be used to both handle traditional network functions and support edge computing services for enterprise and government clients. Amazon.com (AMZN), it should be noted, is also looking to form edge computing partnerships with mobile carriers, via its AWS Wavelength service.

Intel, still by far the world’s biggest server CPU supplier, naturally views NFV (whether deployed for mobile or wireline networks) as a growth opportunity as well. In Q4, Intel’s Data Center Group (DCG) saw its sales to communications service providers rise 14% annually.

Nvidia, meanwhile, is five months removed from unveiling Aerial, a software development kit (SDK) that lets servers packing Nvidia GPUs handle signal and packet-processing workloads for 5G radio networks. Aerial is part of a broader Nvidia GPU/software platform for edge computing deployments known as EGX.

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