Japanese telecommunications giant NTT Communications (NYSE:NTT, news, filings) made a significant M&A move this morning with an agreement to purchase South African based Dimension Data. Dimension Data is a systems integrator that focuses on the multinational enterprise market to the tune of about $4B in annual revenue with some 6000 corporate customers. The purchase price is £2.1B, or about $3.2B. NTT's move should be seen as an expansion of focus both in terms of geography and product line.
In terms of geography, NTT's international corporate business has focused on clients based in Asia with needs also in Europe and North America. Dimension Data gives them greater scale in North America and Europe, but also gives them an interesting foothold in Africa and the Middle East. With the opening of several new submarine cables in those areas, it would be easy to see NTT leveraging Dimension Data's presence to expand its networking business to these regions.
In terms of product line, NTT's traditional position was in the networking and datacenter areas, while Dimension Data is more about the operation and maintenance of IT infrastructure - generally at the client's site. In other words, they don't really overlap that much. That suggests NTT is substantially increasing the scope of its international corporate business.
I also suspect that NTT's move into the cloud computing segment has a lot to do with this deal. To make the case for their virtualization products such that multinationals will outsource their computing and networking needs to the cloud, having such on-site IT development capabilities to smooth the transition may become an important selling point.
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