Instant Analysis: Facebook and Microsoft Team Up for Undersea Cable

By Markets Fool.com

SOURCE: KICKOUTSILENCE VIA DEVIANT ART.

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What happened?

Two tech titans are combining forces in an effort to widen the internet's pipes. Facebook and Microsoft announced on May 26 they will build an undersea cable connecting the U.S. to Europe. Construction of the cable -- to be known as "MAREA" (Spanish for "tide") -- will begin this August, with completion slated for October of next year.

In its press release, Facebook wrote that MAREA will have an estimated capacity of 160 terabytes per second, making it the highest-capacity undersea cable ever to span the Atlantic.

It will connect Virginia Beach, Virginia, with the city of Bilbao in northern Spain, a distance of about 4,100 miles. MAREA is to be operated and managed by Telxius, a division of Spanish telecom incumbent Telefonica .

Does it matter?

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Neither Mircrosoft nor Facebook (nor Telefonica, for that matter) provided the financial details or terms of the arrangement. Regardless, given their high profitability and robust cash flow, the outlay is probably not significant for either. And it will be more than worth it to, in Facebook's words, "accelerate the development of the next-generation of Internet infrastructure and support the explosion of data consumption and rapid growth of [Facebook's and Microsoft's] respective cloud and online services."

Much of this data consumption, of course, consists of people checking out their Facebook timelines and (perhaps less frequently) using Microsoft's online services.

Despite the proliferation of cloud computing, cable transmission is still a quick and effective way to move large chunks of data across distances. This isn't the first cable project for either Microsoft or Facebook, and it surely won't be the last. The former already has or is planning four such projects, while the latter's tally is two.

Considering that, the MAREA project in and of itself shouldn't impact the investing thesis for either company. It probably won't move the needle on Telefonica, either. But shareholders should be comforted that both companies are moving quickly to expand the networks that keep users online -- and have connected their services, naturally.

The article Instant Analysis: Facebook and Microsoft Team Up for Undersea Cable originally appeared on Fool.com.

Eric Volkman owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook, and owns shares of Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.