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Entries in Data Centers (16)

Thursday
Apr122012
DateThursday, April 12, 2012 at 8:55AM

US Army Selects Verizon Enterprise Solutions to Move to the Cloud

Source: Verizon Press Release

Verizon Enterprise Solutions will help the U.S. Army move to cloud computing, enabling it to lower costs and consolidate data centers. Verizon, as part of a General Dynamics-led team, has been awarded two contracts to develop and implement fixed and mobile cloud computing capacity for the Army under the Area Processing Centers Army Private Cloud 2 initiative, known as APC2. The five-year, multiple-award contracts have a combined potential value of $249.8 million to all awardees.

As part of the General Dynamics team, Verizon, through its IT services unit Terremark, will provide infrastructure - including world-class cloud assets designed to meet federal security guidelines, and server, network and storage capacity - for the initiative.

APC2 is a new component of the LandWarNet strategic initiative, which encompasses all Army information computing capabilities such as collecting, processing and storing information. Through the program, the Army intends to lower application migration, hosting, administration and maintenance costs by moving to cloud infrastructure and reducing the number of data centers it operates.

Under the APC2 Fixed Suite 1 contract, Verizon will work with General Dynamics to establish a secure, reliable and cost-effective computing platform for the Army. Under the Mobile Suite 2 contract, Verizon will work with General Dynamics to provide a mobile data center solution to support business continuity plans and cases where rapid deployment of computing is critical.

AuthorDeborah Rand | Comments Off | | | Print ArticlePrint Article
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Tuesday
Apr102012
DateTuesday, April 10, 2012 at 1:15PM

Xand and Access Northeast Merge, Eye Growth in the Cloud

Company Projects 70 Percent Growth in Cloud Services in 2012

Over the past year, Boston-based private equity of firm ABRY Partners has accumulated a sizable data center portfolio across the U.S. through a string of deals. Last week, ABRY increased its stake data centers with yet another transaction.  On Tuesday April 3, ABRY announced that one of its portfolio companies, data center operator Xand Corporation, had merged with Marlboro, MA-based Access Northeast.  Financial terms of the deal were not disclosed.

The merger of Xand and Access Northeast creates one of the largest privately-owned data center companies in the Northeast U.S. with facilities in Massachusetts, New York and Connecticut. The combined company now serves approximately 1,000 customers with a mix of facilities-based colocation services and managed cloud services.

While Access Northeast will be a newcomer to the ARBY umbrella of companies, Xand itself has only been an ARBY company since late 2011.  The Hawthorne, NY-based data center provider was acquired by ABRY in a deal announced October 13, 2011.  Xand operates approximately 30k square feet of data center space located in its flagship data center in Westchester County, NY.

Access Northeast meanwhile operates data centers in three New England cities—Worcester and Marlboro, MA, and Danbury, CT.  In June 2011, Access completed a new 10k square foot raised floor project in Marlboro, increasing its data center space to 25k in the region.  The rest of Access’ 50k square feet of data center space is split between Worcester and Danbury.

There is no publicly-available financial information on both Xand and Access Northeast, but Rob Stephenson, chief marketing officer of the merged company (and former ceo of Access Northeast), recently estimated Xand’s annual revenue at $13m-$15m and Access Northeast’s in the range of $19m-$20m.  While both companies have exhibited strong growth in recent years according to Stephenson, he sees the top line for both entities pushing higher in the coming years as well, fueled by the demand for cloud services.

"We've seen a combined growth of 20 percent over the last three to four years," commented Stephenson. "What's getting our growth this year to up to 25 percent is the growth in cloud services. We anticipate at least a 70 percent growth in cloud services, maybe even a doubling in revenue, from 2011 to 2012."

ABRY will likely invest heavily in Xand/Access Northeast in the next few years, supporting this increasing demand for cloud services.  The combined companies control approximately 60k square feet of developable data center space on top of their facilities currently in operation.

ABRY has a wealth of experience in the data center and managed services space, and has been successful in managing companies through high-growth periods and then dealing them for a premium.  ABRY picked up Hosted Solutions in 2008 for $140m, and then sold the managed services provider to Windstream just two years later for $310m. Similarly, ABRY sold CyrusOne to Cincinnati Bell in 2010 for $525m just two years after acquiring the data center company. ABRY invested heavily in CyrusOne during 2008 and 2009 and was rewarded with attractive deal multiples of 7.2x revenue and 12.5x OIBDA.

AuthorAdam Brissette | Comments Off | Reference1 Reference | | | Print ArticlePrint Article
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Wednesday
Mar142012
DateWednesday, March 14, 2012 at 11:20AM

Are Telcos Ramping Up for More Involvement in the Cloud?

Networks are Key to the Cloud, Leaders Say, and Should Capitalize on the Its Potential

In recent weeks, several industry leaders have reiterated the potential for telcos to get more involved in the cloud—to finally embrace the movement deemed “Telco 2.0.” At the Cloud Connect Conference in Santa Clara, California, NTT America cto Doug Junkins reminded a standing-room-only crowd that, “The cloud is not the cloud without the network.” That same week, AT&T announced its virtual private cloud service—AT&T Synaptic Compute as a Service—through VMware. And just last week, Warren Chaisatien, Ericsson Strategic Marketing Manager, said, “At a time when telecom operators across the region are looking to differentiate themselves and looking for new revenue streams, cloud services offer growing and largely untapped potential.... Operators are in a unique position to utilize their expertise in managed services and take advantage of network features to enhance cloud offerings for users.”

There has even been a flurry of articles lately, as analysts discuss the specifics of how and where telcos should get involved with the cloud. All of this clamoring comes after several quiet months, where there seemed to be little conversation or activity in the way of telco investments in the cloud. Perhaps a new kind of “spring fever” is upon us.

And it's about time. In 2011 we saw telcos dip into the cloud services game by investing more and more in data centers—from giants like Verizon and TDS, to Kansas-based Twin Valley Telephone, North Carolina-based North State Communications, and New York-based Warwick Valley Telephone. For many companies, the hope was that revenue from data centers would allow them both to capitalize on the cloud hype and offset other losses with a new revenue stream. In some cases that strategy seems to have worked, at least in the short term. Last month Cincinnati Bell, one of the first publicly-traded LECs to invest heavily in data centers, reported that during an otherwise lackluster quarter, revenue from its data center unit had increased 21% in 4Q11, compared with 4Q10. The data center unit was its highest performing growth area.

But Junkins and others at the Cloud Connect Conference think there is more cloud revenue for the taking, beyond just data centers. Specifically, Junkins argued in his break-out session that telcos are already sitting on the golden ticket: the networks they already own. And telcos cannot afford to be, simply, a "dumb pipe." According to analyst David Berlind, Junkins's message was “practically a constant theme” throughout the conference—asserting that carriers are “uniquely positioned to be the preferred providers of an array of cloud-based services to enterprises.” This includes “everything from virtualized networks to public and private infrastructure-as-a-service (IaaS) offerings.” To Berlind, “It's just a matter of time before the telcos recognize the opportunities, realign their currently siloed businesses, and embrace more of a 'Telco 2.0' culture.”

In fact some analysts argue that, in order for telcos to remain relevant to consumers in a post-PSTN era, “data-centric” services, via the cloud, will have to become a priority. Possibilities include, of course, Enterprise Cloud Services—meaning data storage and processing, which some providers are already doing by owning and operating cloud computing facilities, or by partnering with other third parties. But there are also opportunities to participate in Consumer Cloud Services, which securely store consumer data and digital entertainment services.

For now, it's mostly the big companies like AT&T or Verizon who are making headlines with cloud services, data centers, and the like. But as I've talked with small and regional providers in rural areas recently, most of them admit that they, too, are exploring cloud services. For example, when I spoke to Peoples Telephone Cooperative marketing director Lisa Webber last month, she acknowledged that the Texas co-op was “looking into cloud services” and hoped to get involved in the near future. The same sentiments came from Paul Bunyan Telephone in Minnesota—in just about the same phrasing. Right now, that's usually as far as the discussion goes; rural telcos are interested in the cloud, but the question is, will they get involved in the cloud.

AuthorCara Snider | Comments Off | | | Print ArticlePrint Article
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Thursday
Feb162012
DateThursday, February 16, 2012 at 11:22AM

Cincinnati Bells Posts 4Q11 Loss, Eyes Data Center Options

REIT Conversion and Sale Among Considerations for Data Center Unit

Cincinnati Bell was one of the first publicly-traded LECs to invest heavily in data centers, a strategy that has stabilized the telcos’ top line in recent years and granted it a high-growth business segment. Last Friday the company reported 4Q11 earnings and its colocation unit provided the highlights to an otherwise lackluster quarter in which it posted a significant operating loss. While its 4Q11 earnings disappointed, news of a potential shakeup in its data center segment gives Cincinnati Bell shareholders reason for optimism.

In 4Q11, Cincinnati Bell’s operating margins slipped and it took a $50.8m goodwill impairment charge leading to a 13% drop in annual operating income from 2010 to 2011. Overall, the company reported a quarterly loss of $30.4m for 4Q11 on revenues of $365.3m.

Despite the loss, Cincinnati Bell continued to generate more revenue from colocation services in 4Q11. It took in $49.1m in data center revenues in the quarter, a 21% increase from 4Q10. Operating income from data centers increased a more modest 10% YoY, with the gains trimmed by higher marketing and operating costs as the company attempts to attract more clients. 

For the year, Cincinnati Bell invested $118.5m in its data centers, accounting for 47% of its overall capital expenditures. Colocation revenue was $184.7m during 2011, indicating a capex margin of 64% for the segment. It increased capacity by 124k square feet in the year, ending 2011 with 763k square feet of data center space.

With this continued reinvestment into the business and on the heels of another strong quarter from its data center unit, the company announced last Friday that it is exploring options for the segment ranging from a sale of the unit, to an IPO to no change at all. At the root of any of these options: unlocking the value from what has been Cincinnati Bell’s highest growth area.

The announcement is a strong statement by management that it does not feel the true value and growth potential of its data center business is adequately reflected in the company’s market price. Looking further into Cincinnati Bell’s historical trading multiples offers some insight into why the company feels it is undervalued.

The foundation of Cincinnati Bell’s colocation business is CyrusOne, a data center operator it acquired from private equity firm ABRY Partners in June 2010 for $525m. Pre-CyrusOne acquisition, the public was trading Cincinnati Bell with an implied business enterprise value of around 2.1x revenue. Post-deal, the market has continued to trade the company in the same range of 1.9x-2.2x revenue.

Given the favorable OIBDA margins (55% vs. 41%) and higher growth profile of data centers compared to Cincinnati Bell’s traditional wireline segment, management logically expected a jump in its trading multiples after shifting its service mix towards data centers. The gain has never materialized, suggesting that the market has continued to value CyrusOne’s business in line with Cincinnati Bell’s traditional telco operations.

Recent transaction multiples indicate that a sale of the LECs data center operations may not create the value for shareholders that management seeks. For data center deals announced since the start of 2011, deal multiples have averaged 4.7x revenue and $1,118 per operating square-foot. These levels point to an estimated price tag of $850m-$875m for Cincinnati Bell’s data center business. Given that Cincinnati Bell itself paid significantly higher prices of 7.2x revenue and $3,000 per operating square foot for CyrusOne, a sale at the recently observed averages is not a particularly attractive option for shareholders.

A more intriguing plan that could create immediate value for shareholders is to convert the data center segment into a publicly-traded REIT—the same organizational structure maintained by data center developer Digital Realty Trust. Cincinnati Bell’s cfo Kurt Freyberger indicated the company is assessing a REIT conversion, adding that he believes the value of the data center business has been discounted by the public as a result of its association with the company's traditional telco operations.

Based on Digital Realty’s recent public trading levels, converting the data center segment into a REIT could pay off for Cincinnati Bell’s shareholders. The market is currently trading Digital Realty at 9.5x trailing revenue and at 17x cash flow, well above Cincinnati Bell’s current public multiples and more in line with the prices it initially paid for CyrusOne. These levels indicate a potential value of $1.8b for the data center segment—or around 60% of the company’s current implied business enterprise value.

While Cincinnati Bell maintains that all options are on the table for its data center business, it has made steps to remove barriers preventing it from forming a REIT.  By definition REITs must own the buildings and land associated with its real estate holdings, and accordingly CyrusOne has moved to purchase the properties and facilities in which it operates and now owns about half of its data centers.

Regardless of what plan of action the company takes, it indicated the evaluation process will take around 6 to 12 months. However, after an initial assessment of the options, it appears that a REIT conversion strategy is at least worth a deeper look.   

AuthorAdam Brissette | Comments Off | | | Print ArticlePrint Article
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Monday
Jan232012
DateMonday, January 23, 2012 at 11:58AM

CenturyLink's Savvis Provides Connectivity to Eris Exchange

Source: CenturyLink Press Release

Savvis, a CenturyLink company (NYSE:CTL), announced the availability of a range of low latency connectivity options for trading firms requiring access to interest rate swap futures transacted on Eris Exchange, LLC.  

Eris Exchange is an open access futures exchange for interest rate risk management, offering forward starting and spot starting interest rate swap futures contracts cleared by CME Clearing. Clients access the exchange via the Eris SwapBook electronic trading platform and Eris BlockBox trade reporting portal.  Eris Exchange’s innovative IRS futures contracts combine the flexibility of over the counter (OTC) swaps with the ease of futures processing.

Trading participants can leverage Savvis Markets Infrastructure to connect to Eris Exchange. Colocation with Eris Exchange’s trading infrastructure is available in Savvis’ NJ3 data center in Piscataway, N.J., and CH4 facility in Chicago.  Alternatively, cost-effective low latency connectivity is available across Savvis’ global network from NJ3 to other data centers.

AuthorDeborah Rand | Comments Off | | | Print ArticlePrint Article
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