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  1. #1
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    [EN] CenturyLink Considers Selling Its Data Centers

    by Gina Narcisi on November 6, 2015, 1:31 pm EST

    CenturyLink might be taking a page out of Windstream's book as the telecommunications giant seeks alternatives for its data center operations and co-location business. Telecommunications provider WindStream agreed to sell its data center services business, including more than 20 data centers, to cloud services and co-location provider TierPoint last month for $575 million.

    According to CenturyLink, there are several strategic alternatives on the table, including partnerships or a joint venture, a sale of all or a portion of the data centers, or potentially keeping the data center assets as part of CenturyLink's portfolio, said Glen Post, president and CEO of CenturyLink, during the provider's third-quarter 2015 earnings call this week.

    "We believe we have the right strategy in combining our network service offerings with the delivery of managed IT and cloud-based services. … We expect co-location services will continue to be a service our customers will look to us for, but we do not necessarily believe we have to own the data center assets to be effective in delivery of those services," Post said.

    Selling its data center business was the right move for Windstream and could make sense for CenturyLink, too, said Andrew Pryfogle, senior vice president of cloud transformation at Petaluma, Calif.-based master agent Intelisys. CenturyLink is a supplier partner to Intelisys.

    The potential move has partners wondering if CenturyLink already has a potential suitor in mind for its data center business.

    "I think they've been thinking about this for a while, and now that Windstream just sold [its data center business], it's probably the fuel they need to move forward," said John Hudson, director of service provider solutions at Lumenate, a Dallas-based IT consulting firm and CenturyLink partner.

    Hudson believes this is indicative of more data center consolidation in the future.

    "I think it’s a broader discussion about shrinking margins in the industry. I think [consolidation] is going to start to happen at a rapid pace," he said.

    But while telecom companies might be moving out of the data center operations space, that doesn’t mean they are moving out of the cloud, Pryfogle said.

    "The trend is a real one. A lot of service providers are being prompted to make the same decision right now, and some are choosing to focus on their core business," he said.

    At the end of the day, CenturyLink is in the business of services, not the physical asset business, Lumenate’s Hudson agreed.

    "I believe their value in the marketplace is derived from the outcomes they provide. It's just not about the physical locations or the co-location space," he said.

    But Hudson is questioning whether MPLS circuits or private lines that were once "on-network," or directly connected to CenturyLink's own network within the provider's data centers, will still be considered on-network in a third-party data center, or if the connection will be going through another service provider to get to CenturyLink's network.

    "I do wonder if now we are going to be [off-network] from a telco perspective and how that is going to impact the circuit lines," Hudson said. "Or, I wonder if CenturyLink will say its third-party facilities are considered [on-network], like Level 3 does with its data center partners," he said.

    CenturyLink, Monroe, La., leases most of its 59 data center facilities in the U.S., Europe and Asia from third parties. CenturyLink's Post estimated that the provider most likely owns fewer than 10 data centers -- mainly former Qwest data center facilities.

    CenturyLink's data center operations and co-location business generates annual revenue of approximately $600 million, according to the company.

    "For us to really grow the business, the [co-location] business, it requires really more CapEx than we've been willing to put in," Post said on the earnings call. "[CenturyLink] said that up front, that we weren't going to invest heavily in the data centers."

    Post elaborated on the company's data center operations review during the question-and-answer portion of the call, telling analysts that selling off its data center assets won't affect any of the cloud or hosting offerings the CenturyLink portfolio has today.

    CenturyLink, like other service providers, doesn't have to "own the dirt" to provide cloud services, Intelisys' Pryfogle said.

    "There are a lot of awesome data center companies out there running world-class [facilities], and CenturyLink already has relationships with many of them, so I don't think it changes their strategy at all. It just gets them away from having to run data centers."

    Data center operations are expensive. If CenturyLink does sell some or all of its data center assets, the provider could be freed up to continue down the cloud acquisition path it's been on, Lumnate's Hudson said.

    The sale also could free up operating cash that CenturyLink can put back into the business, Pryfogle said.

    "They are definitely doubling down on their cloud strategy, so I wouldn’t be surprised if they were looking at other strategic acquisitions," he said. "They are becoming a significant player in the private and hybrid cloud arena, so I think investing more on that side of their business would be really smart."

    "We think our cash flow maybe could be used for investments that can drive higher returns … and drive better shareholder value," Post said in response to an analyst question regarding profits from the potential sale.
    http://www.crn.com/print/news/data-c...o-partners.htm

  2. #2
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    CenturyLink Data Centers For Sale

    Analysts estimate that the data centers generate about $620 million in annual co-location revenue and roughly $200 million of EBITDA.

    BY REINHARDT KRAUSE, INVESTOR'S BUSINESS DAILY
    11/05/2015 12:36 PM ET

    CenturyLink plans to sell 59 worldwide data centers that house computer servers and networking gear, but analysts disagree on potential buyers.

    CenturyLink is the nation's No. 3 local phone company, behind AT&T and Verizon.

    Macquarie Capital says wholesale data center operator Digital Realty could be a buyer of CenturyLink's data centers, while Citigroup speculates that Interxion Holding could be interested in European assets or more.

    CenturyLink could use the proceeds from a sale to fund a new stock buyback, UBS says in a report. CenturyLink plans to hold on to its cloud and web-hosting services business.

    Jefferies analyst Mike McCormack says CenturyLink may have trouble finding a buyer.

    "While little detail was provided regarding profitability of the data center/co-location business, it clearly is not a core competency for CenturyLink," McCormack said in a report. "We expect these data centers will need investment to match competitor power capabilities, and with revenue in decline, and margin uncertainty, we are hesitant to assign meaningful value to a potential asset sale."

    Analysts estimate that the data centers generate about $620 million in annual co-location revenue and roughly $200 million of EBITDA.

    Gregory Williams, an analyst at Cowen & Co., said: "As far as potential buyers of the co-location assets, despite the heavy consolidation in the data center market today, given the size of the entire portfolio, selling the entire portfolio in a single transaction could prove challenging, and the more likely scenario could be selling them piecemeal."

    CenturyLink bought Savvis, which operates data centers, for $2.5 billion in 2010. Verizon acquired cloud service firm Terremark in 2011 for $1.4 billion.
    http://news.investors.com/technology...not-buyers.htm

  3. #3
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    "Resumo"

    • CenturyLink, Monroe, La., leases most of its 59 data center facilities in the U.S., Europe and Asia from third parties. CenturyLink's Post estimated that the provider most likely owns fewer than 10 data centers -- mainly former Qwest data center facilities.
    • "For us to really grow the business, the [co-location] business, it requires really more CapEx than we've been willing to put in," Post said on the earnings call. "[CenturyLink] said that up front, that we weren't going to invest heavily in the data centers."
    • Post elaborated on the company's data center operations review during the question-and-answer portion of the call, telling analysts that selling off its data center assets won't affect any of the cloud or hosting offerings the CenturyLink portfolio has today.
    • "We think our cash flow maybe could be used for investments that can drive higher returns … and drive better shareholder value," Post said in response to an analyst question regarding profits from the potential sale.
    Última edição por 5ms; 06-11-2015 às 23:48.

  4. #4
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    Centurylink Earnings Report: Q3 2015 Conference Call Transcript

    The following Centurylink conference call took place on November 4, 2015, 05:00 PM ET. This is a transcript of that earnings call:

    Company Participants

    • Tony Davis; CenturyLink Inc; VP of IR
    • Glen Post; CenturyLink Inc; CEO & President
    • Stewart Ewing; CenturyLink Inc; CFO
    • Ross Garrity; CenturyLink Inc; Interim President of Global Markets
    • Aamir Hussain; CenturyLink Inc; CTO


    Other Participants

    • Michael Rollins; Citigroup; Analyst
    • David Barden; BofA Merrill Lynch; Analyst
    • Amir Rozwadowski; Barclays Capital; Analyst
    • Simon Flannery; Morgan Stanley; Analyst
    • Batya Levi; UBS; Analyst
    • Frank Louthan; Raymond James; Analyst
    • Mike McCormack; Jefferies; Analyst
    • James Moorman; D.A. Davidson & Company; Analyst
    • David Xavier; Wells Fargo Securities; Analyst


    PDF (15 páginas) http://s.t.st/media/xtranscript/2015/Q4/13353409.pdf

  5. #5
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    Why CenturyLink Doesn’t Want to Own Data Centers

    by Yevgeniy Sverdlik on November 5, 2015


    CenturyLink’s colocation business, the business whose seeds were sown primarily four years ago with the $2.5 billion acquisition of Savvis, is not doing well. Colo revenue is not growing, and the telecommunications giant is looking for ways to avoid investing more capital in the segment.

    While it plans to continue offering colocation services, Monroe, Louisiana-based CenturyLink is looking for “alternatives” to owning its nearly 60 data centers around the world that support colocation, managed hosting, and cloud services. The company’s leadership is under pressure to cut costs, and getting out of data center ownership is one way to do it.

    To be clear, CenturyLink does not actually own most of the data center facilities in its portfolio. Aside from a handful of buildings – mostly ones that were part of its merger with Qwest in 2011 – the company leases them from wholesale data center providers, so when its CEO Glen Post announced the plans on the company’s earnings call Wednesday, he was probably talking primarily about infrastructure inside the facilities.

    In most wholesale data center leases, tenants build out at least some of their own infrastructure, such as power and cooling equipment or racks and cabinets. Details on the plans are scarce, as the process has just started, and company executives are tight-lipped about it at the moment.

    “We are exploring a range of strategic opportunities that may be available for all of the data centers we operate, not just those owned by CenturyLink,” company spokesman Justin Lopinot said in an email. “This includes assets that support our colocation business, whether we own the underlying land and physical structures or just the infrastructure inside the buildings.”

    Colo Revenue Shrinks

    A look at the financial results CenturyLink reported for the third quarter does offer some hints about the reasons behind the about-face. Just last year, Drew Leonard, VP of global colocation at the company, told us colocation remained core to the strategy, even as the company was aggressively expanding and promoting its cloud services.

    Considered as a whole, revenue of the business unit that includes colocation, managed hosting, and cloud shrunk in the third quarter, going from $331 million in Q3 of last year to $324 million this year. But managed hosting and cloud revenue actually increased, going from $145 million to $152 million, while colocation, taken alone, was down to $151 million from $164 million in revenue reported for the same period last year.

    Another part of the segment, hosting area network, contributed $1 million to the overall decline, but it’s clear that colocation is primarily responsible for dragging down the business segment’s overall results.

    The alternatives to data center ownership CenturyLink is considering concern the colocation business alone, Post said on the call. The company is not willing to invest the necessary capital to continue expanding this business, choosing instead to focus on “investments that can drive higher returns, basically,” he said.

    Plus, it’s not crucial to own data centers to be able to offer the full gamut of data center services. Possible alternatives to full ownership are continuing to own some of the assets, while selling others; selling all of them and leasing them back; entering into joint ventures where outside investors buy partial stakes in the assets. Retaining ownership of all the assets is also still on the table.

    To put things in perspective, while not insubstantial, the $600 million colocation business represents a small portion of CenturyLink’s overall revenue mix. The company’s total Q3 revenue was $4.5 billion – nearly flat year over year.

    Should Telcos Get Out of Data Center Business?

    CenturyLink hiring an advisor to help examine the alternatives to data center ownership is a concession that the analyst who said last month that US telcos should sell their hosting businesses was at least partially right. Gregory Williams, an analyst at the investment banking firm Cowen and Company, issued a note saying CenturyLink’s hosting business, including colocation, was a “disappointment,” and that other big US telcos, such as AT&T and Verizon, also weren’t doing so well in this market.

    “Since acquiring Savvis [CenturyLink’s] hosting product segment could be seen as a disappointment, as the segment experienced elevated [customer] churn, a $1.1 billion asset write-down in 2013 and grew just 4.5 percent in 2014,” he wrote.

    Both Verizon and AT&T are also looking to sell many of their assets, including data centers, according to news reports. In October, Arkansas-based telco Windstream announced an agreement to sell its data center business to TierPoint, a data center roll-up focused on regional markets.

    Commenting on the Windstream deal last month, Philbert Shih, managing director at Structure Research, a market research firm focused on the colocation space, warned that it was too early to assume that telcos getting out of the data center services business was going to continue as a trend.

    While more such deals are likely to happen, they have to be looked at on an individual-company basis, he said. “It’s maybe a bit early to tell,” Shih said. “We probably will not see too many of them.”
    http://www.datacenterknowledge.com/a...-data-centers/

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