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Will Verizon’s (VZ) Acquisition of Niddel be a Major Boon?

Zacks

Verizon Communications Inc. VZ recently enriched its portfolio of managed security detection and response services for enterprise customers with the acquisition of privately held Niddel Corp., a specialized provider of machine-learning-based automated threat hunting. However, the financial terms of the deal have not been disclosed.

Niddel’s primary product, Niddel Magnet, is a subscription service that uses machine learning to locate infected or compromised machines inside an organization. It works completely autonomously and doesn’t require customers to generate their own code, rules, searches or even any kind of content. The company uses a variety of information from more than 50 internal and external sources to track the kinds of security threats that have the chances of affecting machines in customer organizations.

Verizon’s Network Strategy for 2018

Verizon, which was the first to deploy 4G LTE network nationwide six years ago, plans to launch next-generation 5G wireless residential broadband services in three to five U.S. markets in 2018. The company announced a contract with Samsung to start commercial 5G fixed-wireless services. Samsung will provide Verizon with commercial 5G home routers, 5G radio access units comprising a compact radio base station and virtualized RAN elements, as well as 5G radio frequency planning services.

The 5G mobile networks will be of utmost necessity in managing the exponential growth of internet-connected devices, popularly known as Internet of Things (IoT). According to a recent report by research firm International Data Corporation (IDC), worldwide spending on IoT is slated to grow 14.6% year over year to $772.5 billion in 2018. Moreover, the IoT space will witness a compound annual growth rate (CAGR) of 14.4%, which is expected to reach nearly $1.1 trillion in 2021.

Notably, AT&T Inc. T is planning to offer standard-based mobile 5G services to consumers in various U.S. markets by late 2018. However, a full phased 5G wireless network will be offered only in 2020. By that time, other national telecom operators, such as T-Mobile US Inc. TMUS and Sprint Corp. S may join the 5G race. Additionally, United States Cellular Corp. USM is also preparing to deploy 5G wireless network.

Importance of the Deal

Per Research and Markets, the managed security service market is expected to grow from $17.02 billion in 2016 to $33.68 billion by 2021, reflecting a compound annual growth rate (CAGR) of 14.6%. Verticals such as Banking, Financial Services, and Insurance (BFSI), government, telecom & IT, education, healthcare, and retail are likely to be the primary markets for the managed security service.

The risk and compliance management segment within the managed security market is expected to grow at the highest rate. In 2018, we expect 5G wireless network to be a game changer in the telecom space with a full-fledged deployment in 2020. Takeover of start-ups like Niddel will help Verizon to establish its IoT foothold by that time.

Price performance and Zacks Rank



In the past year, Verizon’s shares have gained 3.38% against the industry’s decline of 4.40%. Verizon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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