One of the leading telecom and data solution providers in the
) has launched another cloud product -- Savvisdirect. The new
cloud product is designed to cater to every business size and
provide cost effective cloud computing solutions.
We believe that CenturyLink is gaining significant momentum in
the enterprise market with the introduction of Savvis' product
lines. The acquisition of Savvis in 2011 has not only resulted in
revenue accretion but has also expanded CenturyLink's reach
beyond the conventional market of core local phone business.
Over the years, CenturyLink's phone business has experienced
consistent decline. This is evident from continued 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 weakness.
Although the company is working on a number of initiatives to
curtail 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 has
well marked CenturyLink's entry into the cloud computing
business, which is growing by leaps and bounds. CenturyLink has
expanded its footprint in the hosting managed cloud services
business to 50 data centers in North America, Europe and
The company continues to expand data centers this year with an
aim to generate higher revenue growth in managed hosting and
cloud services. These acquisitions bequeathed several additional
benefits like greater scale of operations and increasing
productivity, besides providing the company with a competitive
edge over larger telecom carriers like
Verizon Communications Inc.
However, stiff competition from other low cost telecom
LEAP Wireless International Inc.
) and increased operating expenses resulting from the
acquisitions may impede the company's growth trajectory.
CenturyLink retains a Zacks #2 Rank, implying a short-term
(1-3 months) Buy rating. For the long term, we have a Neutral
recommendation on the stock.
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