12 Recent Networking Industry Acquisitions To Keep An Eye On4:00 PM EST Tue. Apr. 19, 2011
The IT networking and telecom service provider spaces have been a magnet for mergers and acquisitions in recent years, from the blockbuster buys of Tandberg, 3Com and Nortel's enterprise unit by Cisco, HP and Avaya, respectively, to a non-stop run of marriages among VARs and integrators.
Last week, CRN asked a number of solution providers and other channel observers for their thoughts on what recent networking industry deals have the biggest implications, and here's what they came up with: 12 deals worth chatting about, plus a company thrust into the spotlight anew thanks to a lot of recent speculation.
Well, of course. AT&T's proposed $39 billion acquisition of T-Mobile USA from Deutche Telekom promises to be one of the most closely watched mergers or acquisitions in industry history, thanks to its many implications.
As for what those are, where to start? How about that AT&T would become the largest wireless carrier in the U.S., leapfrogging current No. 1 and bitter rival Verizon? Or that, according to AT&T, having T-Mobile's arrows in its quiver will speed 4G LTE service deployment to reach 95 percent of the U.S. population? Or that federal regulators are already sharpening their knives for a Capitol Hill showdown over the deal? Or that DT, which competes with AT&T for system integration business in several geographies, will now have an 8 percent stake in AT&T and a seat on AT&T's board? We'll be chewing over this one for months and probably years.
CenturyLink's monster merger with Qwest Communications was announced more than a year ago, and it took nearly that long to garner approval from all the sources that needed to bless it, from the FCC to various state governments and industry boards. But the $12.2 billion merger finally finished on April 1, with CenturyLink and Qwest combining operations; Qwest now operates as a wholly-owned subsidiary of CenturyLink, whose shareholders control 50.5 percent of the combined company to Qwest shareholders' 49.5 percent. Now, for partners, the real work begins: the delicate process of combining two sizable channel programs. Expect that to be a hot discussion topic as the integration takes place over the coming months.
Earlier this month came word that Level 3 would acquire Global Crossing for about $3 billion in stock, promising a hulking global networking force with fiber optic networks on three continents. This is the type of deal everyone's talking about simply because it cuts across so many networking disciplines, from IP, Ethernet, data center and video services to transport, collaboration, VPN and managed services. Jim Crowe, Level 3's CEO, described the merger as a "transformational combination," and it's hard to call that an overstatement.
Another whopper with far-reaching implications: Verizon's $1.4 billion pickup of cloud service provider Terremark Worldwide, completed in mid-April. To hear Verizon tell it, the communications giant will leverage Terremark to grow its cloud computing strategy and fatten up its vision of everything-as-a-service to businesses and government customers. Integrated Verizon-Terremark cloud solutions are expected to hit the market in 2012, according to the companies.
Shortly after Verizon announced its Terremark buy in late January, Time Warner Cable made the move for cloud hosting provider Navisite, for $230 million. The deal suggests that cable companies are looking to diversify their holdings as much as other types of telecom service providers -- and that, like Verizon, companies like Time Warner are looking to cloud-centric deals to make that happen. Cloud platforms, telecom providers, IT networking leaders…everyone's playing in each other's sandbox these days.
Another deal with heavy cloud infrastructure implications, Cisco said in late March it would acquire NewScale, which makes software for the efficient provisioning of cloud services. Cisco plans to use NewScale's tools to complement and expand its existing services options for customer-led cloud management and automation -- an indication of one segment Cisco plans to focus even as other Cisco segments flounder.
Need proof that service and cloud provider bigwigs are looking to the IT channel for expansion purposes? Look no further than Paetec, which in early February confirmed it would acquire Avaya powerhouse Xeta Technologies, not eight months after buying another Avaya power, Quagga. The move was especially interesting given that Xeta, itself, was in full-bore acquisition mode and had recently bought a number of smaller solution providers itself. Paetec CEO Arunas Chesonis told CRN that the Xeta pickup is intended to accelerate Paetec's rapid channel and services expansion. Paetec detailed in a recent filing with the SEC that it intends to finance the completion of the acquisition in part through $225 million in new loans.
It hasn't grabbed the headlines of other big-splash telecom service provider and services deals, but M5 Networks' acquisition of Callfinity, confirmed earlier in April, is no minor undertaking. It expands what M5 can offer midsize and enterprise customers using Callfinity's on-premise and off-premise call center solutions, and also continues M5's growth by acquisition. M5 bought Geckotech, a hosted VoIP provider, last fall -- a move that made M5 the largest specialized hosted VoIP company in the country.
Some of the most interesting networking segment acquisitions in the last six months have revolved around video, and Polycom's $50 million buy of Accordent Technologies is definitely one of them. Accordent, which specializes in video content management products, nudges Polycom further into the software arena, and also underscores the growing importance of video content management solutions in the channel.
More proof that stern-faced rivals can become the best of friends, Calix Networks closed its $171 million acquisition of Occam Networks in February, merging two formidable access-market competitors into one. According to Calix, it now boasts 900+ customers globally -- including 72 percent of U.S. local exchange carriers -- and 600 fiber access and 400 commercial video customers.
Wall Street's been watching this one given Calix's new versatility; Morgan Stanley, in an early April analysis of the deal, sees broadband stimulus opportunities among a number of "tailwinds" for the combined companies. According to Calix, it is in 83 percent of the publicly announced vendor selections for broadband stimulus projects as of late February, collectively worth about $630 million.
Is there a more acquisitive national solution provider right now than Carousel Industries? Well, maybe it does have some competition in that regard, but Carousel's appetite for M&A, especially, in the past six months, has been nothing short of impressive. Most recently, Carousel closed its acquisition of A/V integrator and video specialist OmniPresence, continuing a run of pickups that included Juma Technology, TAC Centre, LANForce, and some assets of TriNet Systems and BrantTel Networks. In other words, chomp-chomp, Carousel.
A carrier Ethernet eye-opener: Overture Networks and Hatteras Networks said in early March they planned to merge and become an industry bigfoot. The deal seemed from the get-go like a glove-fit: competitors with very little customer overlap deciding to join forces, both based in Research Triangle Park, N.C., both privately held, and both veterans of the early days -- a little more than a decade ago -- of carrier Ethernet sales to telco service providers.
During a conference call following the merger's March 1 announcement, the CEOs of each company said they had been talking about the deal for three years. The merged company is called Overture Networks, and the plan was for Overture CEO Jeff Reedy to keep the title, with former Hatteras CEO Kevin Sheehan named president.
It definitely hasn't happened yet, and Alcatel-Lucent, according to a spokesperson reached by CRN, definitely isn't commenting. But if Alcatel-Lucent is looking to sell off its enterprise telecom gear business, as The Wall Street Journal first reported using insider sources, its potential acquirers could be really interesting. The business, which includes phones, switches, SIP-compatible software and other wares, is said to be worth about $1.5 billion, and potential suitors might be HP and Microsoft.