Savvis Inc, a subsidiary of leading telecom service provider
), has acquired assets of
) IT Outsourcing (ITO) business. The deal includes sale of assets
to Savvis, including CIBER's contracts, infrastructure, technology
and facilities related to ITO business in North America, Europe and
India. In exchange, Savvis paid $6 million in cash to CIBER and
will pay additional purchase consideration, depending on its
financial performance through December 2013.
Formerly, in 2011, Savvis entered into a reseller contracts with
CIBER, a global provider of IT solutions. Following this agreement,
the acquisition of assets is expected to benefit Savvis' existing
business in application-management services and help-desk
In addition, Savvis would gain access to client and vendor base.
These clients were already being served through Savvis' 50 data
centers across the globe, supported by CenturyLink's network
We believe that 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 has well
marked 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 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 its
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.
However, the stock has a Zacks #2 Rank, implying a short-term (1-3
months) Buy rating.
CIBER INC (CBR): Free Stock Analysis Report
CENTURYLINK INC (CTL): Free Stock Analysis
LEAP WIRELESS (LEAP): Free Stock Analysis
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