Please ensure Javascript is enabled for purposes of website accessibility

AT&T and RingCentral Continue to Play Nice

By Rick Munarriz - Sep 5, 2018 at 3:16PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The telco giant and provider of its private-label enterprise communications platform keep a good thing going by extending their partnership.

AT&T (T 2.02%) and RingCentral (RNG -6.79%) won't be going their separate ways after all. AT&T and RingCentral are extending the relationship where small- and medium-sized AT&T business customers use the RingCentral Office cloud-based platform branded as AT&T Office@Hand. Earlier this year, AT&T had informed its AT&T Office@Hand customers that it would be transitioning away from RingCentral. Existing customers would migrate directly to RingCentral, but future accounts would go with whatever AT&T could cobble together for its private-label offering.

Neither stock is moving on Wednesday's news. AT&T opened slightly lower. RingCentral opened slightly higher -- coming within $0.10 of taking out last month's all-time highs -- only to trade lower an hour into the trading day. It's a win-win. The market just doesn't realize it yet. 

RingCentral's platform across all devices.

Image source: RingCentral.  

Making the right call

RingCentral offers enterprise communications solutions on the cloud. RingCentral plans start at $15.99 a month, allowing users to make and receive calls from their corporate numbers on IP phones, PCs, tablets, and smartphones. The cloud-based platform also makes it easy to set up conference calls, video conferencing, and faxing across all internet-blessed devices. 

RingCentral isn't the only player offering companies tech-savvy enterprise communications solutions on the cloud. However, it's hard to argue with RingCentral's growth. Revenue rose 34% in its latest quarter, well ahead of the 29% to 31% top-line growth that it was publicly modeling. RingCentral's adjusted profit nearly doubled to $0.19 a share, also trouncing expectations.   

AT&T transitioning away from RingCentral wouldn't have been fatal. It would've brought over corporate accounts that it could service and market other products to directly. However, AT&T staying pat with RingCentral opens the door for a larger base of clients on its platform. The move also validates RingCentral as the best-of-class player in this niche. 

Analysts generally like the move. William Power at Baird feels this is a net positive for RingCentral, though he's sticking with his neutral rating on the stock and his $90 price target that is just below where the stock is now. Sterling Auty at JPMorgan also sees this as strategically positive for RingCentral, but he also has a neutral rating on the stock. 

AT&T could've drummed up an in-house solution or turned to one of RingCentral's slower-growing rivals to possibly squeeze more of a mark-up to its Office@Hand offering. However, with AT&T still pushing its latest major acquisition through its digestive tract and RingCentral growing just fine under the current partnership, this is the right move for both parties. Intraday stock charts aren't always the best judges when it comes to grading strategic moves.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

AT&T Inc. Stock Quote
AT&T Inc.
$21.16 (2.02%) $0.42
RingCentral, Inc. Stock Quote
RingCentral, Inc.
$57.91 (-6.79%) $-4.22

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.