Arista may have landed a $50 million contract with AT&T covering data center switches and hardware, according to an analyst at MKM Partners citing "industry checks."
Such a contract would represent Arista Networks Inc. 's first major deal with a Tier 1 service provider, according to MKM's Michael Genovese, and be hugely significant for the SDN player, which has previously catered mainly to smaller operators, as well as Web 2.0 and hosting providers.
"Tier 1s like AT&T are spending a greater portion of capex on data centers," said Genovese in a research note sent earlier today. "That Arista may have secured its first deal in the Tier 1 market is clearly positive if true (we think it is)."
AT&T Inc. (NYSE: T) said it did not comment on vendor contracts when contacted for this story, while Arista emailed Light Reading a statement that similarly stated: "Arista cannot comment on whether AT&T is a customer, let alone contract rumors."
Nevertheless, Arista would likely have faced competition from some vendor heavyweights for the AT&T business, including the likes of Cisco Systems Inc. (Nasdaq: CSCO), Juniper Networks Inc. (NYSE: JNPR) and Brocade Communications Systems Inc. (Nasdaq: BRCD).
All three of those companies are currently involved in AT&T's Domain 2.0 initiative, a cloud program that leans heavily on the use of SDN and NFV technologies and has been linked to a planned reduction in capital expenditure by AT&T. (See AT&T Adds Brocade, Ciena, Cisco to Its SDN, NFV Program.)
Arista, by contrast, is not one of the ten vendors that AT&T has previously named as Domain 2.0 suppliers. While this contract -- if confirmed -- appears not to be directly connected with that initiative, it is clearly very strongly related and could open up further opportunities for Arista with AT&T in future.
It would also suggest that players such as AT&T are not yet ready to take the plunge into "white boxes" -- switches that use low-cost commodity components to run open-source software.
White box developers clearly pose a threat to established vendors, but Arista has been insisting its software capabilities will give it a big advantage over these emerging rivals. "Anybody can build a box, but not everyone can build software," said Jayshree Ullal, Arista's president and CEO, during a recent earnings call. (See Arista Addresses White Box Threat.)
Genovese is clearly impressed with Arista, noting that partnerships it has recently formed with larger IT vendors could support sales growth in the enterprise market.
In the last few weeks, Arista has announced tie-ups with HP Inc. (NYSE: HPQ), Dell Technologies (Nasdaq: DELL) and Super Micro Computer Inc. that will combine compute-and-storage technology from those players with Arista's networking expertise.
The analyst also thinks the company's launch this week of a major new software product in the enterprise market could have a similarly positive impact on its fortunes.
Branded CloudVision, that product is an automation platform designed to improve network management and could hold particular appeal in the "general enterprise vertical," according to MKM Partners. (See Arista Launches Network-Wide Cloud Automation.)
Genovese has raised his 12-month price target for Arista from $80 to $95 per share due to his growing confidence in its prospects.
Arista is currently priced at $85.33 on the New York Stock Exchange, having seen its share price rise by 24.6% since the beginning of the year.
— Iain Morris, , News Editor, Light Reading