September 21, 2004
It's looking more and more like voice over Internet protocol (VoIP) is ready for prime time. Today, SBC Communications (NYSE: SBC ) said that it will provide VoIP services to Ford (NYSE: F ) in one of the largest deployments of its type to date. That should pave the way for more contracts of its type.
According to the deal, SBC will design, build, and manage the system for 50,000 employees -- using phones provided by Cisco (Nasdaq: CSCO ) -- in 110 Ford offices. Media sources say the contract is worth an estimated $100 million. Judging by Ford's lackluster results outlined by my Foolish colleague Seth Jayson last week, the auto company might indeed want to find ways to cut down on expenses and invigorate earnings. VoIP is touted as one way to cut down on costs.
For SBC, a Motley Fool Stock Advisor pick, this isn't the first time it's shown that it's capable of bringing cutting-edge technology to corporate customers. Of course, it has to. Most of us have heard plenty about how plain old phone service isn't really a viable product line anymore -- to the detriment of venerated old names such as AT&T (NYSE: T ) -- now that cable companies have stepped into telecommunications' old turf in so many ways.
The deal between SBC and Ford is yet another sign that VoIP is going mainstream, especially given one very compelling and down-to-earth aspect of the technology -- its cost-effectiveness for users. With an eye toward preserving profits, we can expect to see other big names entering into such agreements. Being on the forefront with a big-ticket deal including a big name such as Ford should give SBC some leverage to lure other big-name corporations as customers.
However, as much as watching increased acceptance of a new technology is fascinating, the sheer competitive nature of the industry still makes it a tough row to hoe for the Baby Bells such as SBC. Foolish analyst Bill Mann recently pointed out the trials in telecom in a commentary that sports one of my personal favorite headlines, Don't Make the Babies Cry.
At any rate, getting such a jump on this new spin on voice communications is no small feat. If big business is finally getting on board with VoIP, there should be a fair amount of hustling from all interested players over the coming months.
Alyce Lomax does not own shares of any of the companies mentioned.