CenturyLink to buy Savvis for $2.5B

IDG News Service - CenturyLink has agreed to buy hosting company Savvis for about US$2.5 billion in cash and shares, the companies announced Wednesday.

The merger will allow CenturyLink to offer Savvis' managed hosting services to existing CenturyLink customers, the companies said.

The combined company will be led primarily by the Savvis leadership team, including its CEO Jim Ousley, CenturyLink said.

The deal will result in a hosting company with global reach, but more heavily dependent on U.S. business than Savvis already is. Savvis provides managed hosting and colocation and cloud services from 32 data centers in North America, Europe and Asia, while CenturyLink offers hosting services from a network of 16 data centers in the U.S.

Savvis obtained about 83 percent of its revenue from North American clients last year, with 13 percent from Europe, the Middle East and Africa, and 4 percent from Asia, according to a company presentation distributed Wednesday.

For the first quarter of 2011, Savvis reported a net loss of $1.8 million on revenue of $257 million, compared to a year-earlier loss of $11.3 million and revenue of $217 million. Revenue from network services, at $65.2 million, remained almost unchanged, but revenue from hosting services rose strongly to $191.8 million, the company said Wednesday.

CenturyLink plans to announce its first-quarter results on May 5. Last quarter, it reported reported net income of $232 million on revenue of $1.72 billion.

The company expects to close the deal in the second half of this year, and ultimately to make savings of $70 million a year by eliminating duplication between the two companies.

Peter Sayer covers open source software, European intellectual property legislation and general technology breaking news for IDG News Service. Send comments and news tips to Peter at peter_sayer@idg.com.