AT&T to Buy Core Routers from Cisco

Top U.S. phone company AT&T said on Monday it was buying core routers from Cisco Systems to upgrade its Internet backbone network, a major win for Cisco amid competition from rival network equipment maker Juniper Networks.

Cisco Systems
Paul Sakuma
Cisco Systems

The companies did not reveal the price and size of the order for Cisco's CRS-1 core routers, but AT&T said it plans to connect Internet hubs in 25 major U.S. cities with the upgraded network in the coming months.

The announcement comes amid concern about slower spending by U.S. companies after Cisco, the world's biggest maker of routers, reported a fall in spending by banks and automakers last quarter.

Investors have also pointed to competition from smaller rival Juniper, which recently launched a new core router called the T1600 to rival the CRS-1.

AT&T said the network upgrade was in response to growing Internet traffic. It will also be used to deliver its advanced Web and video service, called U-verse.

"As the demand for Internet and IP-based applications continues to explode, IP traffic on the AT&T network has doubled throughout the past two years, and we fully expect this substantial growth to continue in the future," said John Stankey, AT&T's group president of telecoms operations.

AT&T also said it chose the CRS-1 after comparing it with similar equipment from other vendors.

The CRS-1 sells for around $500,000 to more than $1 million each, depending on configurations. Most buyers are large phone and cable service providers such as Comcast , Deutsche Telekom and Sprint Nextel .

Cisco shares inched up in premarket trading to $27.58 from Friday's close of $27.45.