One of the leading telecom service providers,
) introduced its new cloud computing product, Savvisdirect. The new
launch is designed for the enterprise class and offers affordable
and simplified cloud solutions. The product will be commercially
available by the end of this year.
The key advantage of this product is that it can be used by any
small medium or large enterprise. Users can quickly access
the Savvisdirect services through paying via credit card. A host of
cloud solutions are being offered through Savvisdirect, which the
clients can choose as per their requirements. To compliment the
product offer, CenturyLink is providing service-level agreements
along with round- the clock support.
We believe that the CenturyLink is gaining significant momentum
in the enterprise market with the introduction of Savvis' product
lines. The acquisition of Savvis has not only resulted in revenue
accretion but also expanded CenturyLink's reach beyond conventional
market of core local phone business.
Over the past years, CenturyLink's phone business has registered
a constant decline. This is evident from the consistent decline in
its access lines on an organic basis. The reason behind this is the
displacement of traditional wireline telephone services by wireless
and other competitive offerings. Further, soft economic conditions
in the company's service territory also continue to contribute to
the cascading effect.
Although the company is working on a number of initiatives to
curtail the access line losses, it remains far from realizing much
of the benefits that would support its business growth.
Meanwhile, the company has gained from industry consolidation of
profitable acquisitions - Qwest and Savvis.
Coming back to Savvis, the acquisition of this company is well
marked in CenturyLink's entry into the cloud computing business,
which is growing by leaps and bounds. CenturyLink currently, has
expanded its footprint in the hosting managed cloud services
business to 50 data centers in North America, Europe and Asia.
The company continues to expand data centers this year with a
view to generating higher revenue growth in managed hosting and
cloud services. These acquisitions bequeathed several additional
benefits like greater scale of operations and increasing
productivity, and providing the company with a competitive edge
over larger peers like
Verizon Communications Inc.
However, stiff competition from other low cost telecom operators
LEAP Wireless International Inc.
) and increased operating expenses resulting from the acquisitions
may impede the company's growth trajectory.
We maintain our long-term Neutral recommendation on CenturyLink.
The stock has a Zacks#2 Rank, implying a short-term (1-3 months)
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