CenturyLink Buys Savvis in $3.2B Managed Hosting, Cloud Deal

Joe Panettieri, Former Editorial Director

April 27, 2011

In a major cloud computing and managed hosting deal, CenturyLink has acquired Savvis for $2.5 billion plus net debt of approximately $700 million. The key trend: Big telecommunications and broadband companies are busy acquiring midsize cloud computing and managed hosting specialists. Should MSPs panic as cloud giants like Savvis, Terremark and NaviSite get acquired? Apparently not. Here’s why.

CenturyLink is the third-largest U.S. telecommunications company. Savvis specializes in cloud infrastructure and global IT solutions. Savvis has been the subject of takeover rumors ever since Time Warner acquired NaviSite and Verizion acquired Terremark Worldwide earlier this year. CenturyLink acquired Savvis for roughly 10 or 11 times Savvis’s expected EBITDA (earnings before interest, taxes, depreciation and amortization) for 2011, which is a slightly lower multiple than Verizon’s buyout of Terremark, according to The Wall Street Journal. Savvis is the third member of the Talkin’ Cloud Stock Index to be acquired so far in 2011.

According to a prepared statement from CenturyLink and Savvis:

“With the addition of Savvis, CenturyLink will achieve global scale as a managed hosting and colocation provider and will accelerate its ability to deliver quality managed hosting and cloud capabilities to its business customers. The combination of CenturyLink’s hosting and network assets with Savvis’ proven solutions in colocation, managed hosting and cloud services substantially enhances CenturyLink’s capabilities and provides the company with a solid platform for future growth.”

Together, CenturyLink and Savvis say they will operate 48 data centers across North America, Europe, and Asia with more than 1.9 million square feet of gross floor space; a national 207,000 route mile fiber network; a 190,000 mile global access network; and have a customer list that includes a majority of Fortune 1000 companies.

Friendly Cloud Giants Seek MSP Partners

Now here’s the important part for regional MSPs serving SMB customers: Many of those recent cloud M&A deals involve channel-friendly partner programs.

Small MSPs, for instance, can re-brand Terremark’s cloud services as their own, according to Bill Lowry, VP of cloud services at Terremark. Lowry explained the channel strategy in this MSPmentor FastChat Video:

Plus, Arrow ECS — the massive distributor — is building a cloud partnership with Terremark, which calls for VARs to host vertical market applications in Terremark’s datacenters.

Similarly, NaviSite also has a channel-friendly cloud strategy. A prime example: NaviSite hosts Level Platforms for managed services providers.

MSPmentor will be watching to see if Savvis maintains a channel-friendly cloud approach that engages MSPs.

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About the Author(s)

Joe Panettieri

Former Editorial Director, Nine Lives Media, a division of Penton Media

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