CenturyLink Inc. plans to acquire cloud provider and hosting operator Savvis Inc. for a $2.5 billion cash and stock purse, the two companies revealed Wednesday morning.
As part of the deal, CenturyLink will also assume or refinance Savvis' $700 million in debt, pushing the total deal to $3.2 billion.
CenturyLink's buyout comes as Savvis was preparing to announce its first quarter 2011 earnings, which saw revenue of $257 million compared to $216.6 million in the first quarter of 2010. Savvis launched a cloud-focused channel program last month.
Income from continuing operations for the first quarter of 2011 was $16.5 million, compared to $4.8 million in the first quarter of 2010. Savvis reported a net loss of ($1.8) million, or ($0.03) per share, in the first quarter of 2011, compared to a first quarter 2010 net loss of ($11.3) million, or ($0.21) per share.
Adding Savvis to its ranks will enable CenturyLink, traditionally a telephone carrier, to scale globally as a managed hosting and collocation provider, it will also fuel CenturyLink's ability to offer managed hosting and cloud services. The companies said that they will operate a combined 48 data centers in North America, Europe and Asia with more than 1.9 million square feet of gross floor space; a national network of 207,000 route miles; and a 190,000 mile global access network. Together CenturyLink and Savvis will boast a customer list flush with Fortune 500 and Fortune 1000 companies, the pair said.
"As migration to cloud-based services continues to accelerate rapidly, a strategic combination was a natural choice to create significant scale and become part of a large global network for the benefit of our customers, stockholders and employees," James E. Ousley, Savvis chairman and CEO, said in a statement. "We believe that combining our proven capabilities in cloud infrastructure and managed hosting with CenturyLink's hosting assets and large base of business customers will create powerful opportunities to accelerate growth."
CenturyLink's plan to buy Savvis, a St. Louis-based provider of cloud infrastructure and hosting services, comes as the service provider and telecom industry feverishly seeks to bulk up its cloud profile through a rash of acquisitions amid declining customer numbers. Carriers and telcos are also looking to grab a piece of the cloud computing market pie, which Forrester Research estimates will reach $241 billion come 2020.
"Today, businesses are shifting the way they manage their information technology services and infrastructure, and this transaction helps us meet these needs by offering Savvis' leading products and services coupled with CenturyLink's network," CenturyLink CEO Glen F. Post III said in a statement Wednesday morning.
Earlier this year, Verizon Communications bought cloud computing provider Terremark in a $1.4 billion deal that gives Verizon a stronger foothold in the cloud computing space and a catalyst for its everything-as-a-service business model. Following that, Time Warner Cable acquired NaviSite, a cloud hosting provider, for $220 million.
CenturyLink's planned Savvis acquisition follows CenturyLink's purchase of Qwest, which closed April 1 to the tune of $12.2 billion, a merger that married the country's third- and fourth-largest telephone carriers.