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Cloud firm Savvis bought for $2.5bn: exclusive interview

US telco buys Savvis hot on heels of Qwest merger

By Jason Stamper

Neil Cresswell Savvis

Neil Cresswell, MD EMEA, Savvis.

US telco CenturyLink announced that it will acquire cloud infrastructure services and ISP firm Savvis for $2.5 billion plus debt of approximately $0.7 billion.

CenturyLink is the third largest telecommunications company in the United States, providing a range of broadband, voice and wireless services to consumers and businesses across the country. The company just merged with Qwest in a stock-for-stock transaction.

Savvis provides cloud infrastructure and hosted IT solutions for enterprises. Speaking to CBR yesterday, Savvis’ EMEA managing director Neil Cresswell said that Savvis has made a vast investment in its data centre infrastructure in recent years in order to become an infrastructure as a service leader for medium to large enterprises and their cloud computing needs. He added that the firm is already investing in additional data centres in the UK, for instance, in order to offer cloud computing ‘pods’ that are even nearer to its customers.

"Our market has always been squarely in the enterprise sector – mid to large enterprises," Cresswell told CBR. "As well as a colocation provider we’ve been a network provider as well. And in the Nineties we launched one of the first commercially available enterprise-grade VPN services. We were probably first to market with our utility storage and utility compute offerings, whose procurement and delivery model was cloud-like. So we have had a lot of heritage in delivering infrastructure as a service to enterprise customers."

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Under the terms of the transaction, Savvis stockholders will receive $30 per share in cash and $10 in shares of CenturyLink common stock. The consideration represents an 11 percent premium over Savvis’ closing stock price as of the close of trading on April 26, 2011.

With the addition of the company, CenturyLink says it aims to achieve global scale as a managed hosting and colocation provider to its existing and potential new business and government customers. CenturyLink anticipates integrating its hosting business and Savvis’ managed hosting and cloud services into a single CenturyLink business unit.

Together, CenturyLink and Savvis say they will operate 48 data centres located in North America, Europe, and Asia with more than 1.9 million square feet of gross floor space, a national 207,000 route mile fibre network and a 190,000 mile global access network.

CenturyLink expects to realize approximately $70 million in full run-rate annual operating cost and capital expenditure synergies. The transaction is expected to be accretive to CenturyLink’s free cash flow per share in the first full year following the close.

The integrated hosting business will be based in St. Louis and led primarily by key members of the Savvis leadership team, including CEO James Ousley, who will head the unit. Following the closing of the transaction, CenturyLink will employ approximately 50,000 people. The companies anticipate closing the transaction in the second half of 2011.

Describing one of Savvis’ core cloud computing offerings, the Symphony Virtual Private Data Centre, Cresswell said: "Our Virtual Private Data Centre offers not only storage and compute power but networking products, security products and everything that you need for a three-tier architecture for enterprise applications, wrapping that into a fully blown data centre as a service product."

"The transaction creates a premier managed hosting and colocation provider with global scale in a high growth sector, and is expected to be accretive to revenue growth and cash flow per share," said Glen F. Post, III, CenturyLink chief executive officer and president, in a statement. "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."

"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," said James E. Ousley, chairman and chief executive officer of Savvis. "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."

Cresswell also noted that Savvis remains an important ISP: in the UK market for instance he said the fim serves around 25 per cent of the UK’s Internet traffic.

Keep an eye on www.cbronline.tv for the full podcast interview with Neil Cresswell, coming soon.

Follow this author on twitter: www.twitter.com/jasonstamper

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