AT&T Partners With AWS: Implications For Radcom?

Two days ago, I drafted a narrative which compiled a few data points I gathered in the public domain that helped me form the idea that RADCOM (NASDAQ: RDCM) could be extending its core product MaveriQ into the NFV cybersecurity arena.

Today, more news came to light that appears to add to that thesis.

AT&T -- a RADCOM customer -- announced a partnership with Amazon Web Services.

According to a Light Reading article on the matter:

AT&T and AWS both view security as the highest priority. As part of this expanded strategic relationship, AT&T and AWS plan to employ their respective expertise and knowledge in security to help customers prevent, detect, and respond to threats faster and more efficiently. Using threat data and knowledge from both organizations will help fuel the processes and tools that comprise AT&T Threat Intellect, the "brains" behind AT&T's security platform that uses advanced analytics to help provide improved end-to-end security protection for every user on our network.

Another Light Reading article suggested:

One of the first things AT&T customers will gain from today's partnership between AT&T and Amazon Web Services is an end-to-end view of their ecosystem that will now include data from applications which sit in the AWS cloud. Going forward, AT&T will also be using that app data as part of its threat intelligence system to tighten security around the entire network-cloud ecosystem.

It sure sounds to me like Gigamon's (NASDAQ: GIMO) GigaSECURE visibility platform and RADCOM's MaveriQ virtual probe solution could combine to drive the services described in the AT&T/AWS press release.

Conclusion

I don't know if I'm 100% correct that GIMO and/or RDCM are involved in this program, but all signs certainly point to a decent probability. The question in my mind is how big can the opportunity be for RADCOM? According to Gigamon, 16% of current workloads are performed in the public cloud and expected to grow to a 40% share in the next couple years.

Whatever the case is, there is a large runway for more "step function" NFV service assurance deals at numerous CSPs across the globe for RADCOM [currently trialing with 9 CSPs], coupled with a substantial amount of optionality depending on how the NFV cybersecurity initiatives play out in time.

That said, I still really like RADCOM here at a $240 million market capitalization: permanent downside risk seems improbable given MaveriQ's current technology edge over the competition [MaveriQ scored 100/100 in the AT&T lab trials, the nearest competitor scored 70/100], a growing relationship with AT&T and a strong balance sheet with $45 million cash and no debt. I really don't have an upside target for the company, but it feels like there is a path to a $1 billion+ valuation if things continue to play out as they appear today.

A classic, "low downside, high uncertainty" bet.

Disclosure: I own RDCM shares.