When it comes to M&A, glbc has gotten more than its fair share of attention as a possible target - not the least of which has come from me of course. However, today they are the ones doing the buying, and the target is one I did not anticipate. Global Crossing has purchased Genesis Networks, which specializes in video over IP services for broadcasters that operates a network reaching PoPs in 70 cities worldwide. Genesis Networks will become a distinct business unit within Global Crossing.
At a purchase price of $27M, including the repayment of $15M in debt, it is not a large deal. But this is not about consolidation within the fiber sector, rather it is an entry into a new segment of the industry that brings a new product line into the mix and a new customer segment with it. But as a substantial managed bandwidth offering, it makes a whole lot of sense to me for Global Crossing to take this path. Their extensive international footprint fits very well with the international broadcast video that Genesis specializes in transporting, and will allow them to carry the bulk of it on-net. Summarizing their reasons for this deal, CEO John Legere said:
The proliferation of HD and 3D video will soon outstrip the capacities of legacy technologies, making media-centric global fiber optic networks like ours the most viable option for broadcasters, producers and distributors. By acquiring Genesis Networks, Global Crossing takes an ambitious step towards providing new and differentiated value-added solutions to address specialized video requirements across multiple industries.
Global Crossing has tightly controlled its spending for the better part of a decade now, and this is the first acquisition it has made that represents an expansion of focus. It seems like something of a shift in their general stance that bears watching. The question that first leaps to mind is what sort of financial firepower they will be putting into developing this market.
So where does this put them strategically? They will now compete directly with the likes of Level 3's Vyvx and Hibernia Media and others in this segment - that much is clear. What it does not do is change their position in the CDN space, where they resell services from Edgecast and Limelight. I can't help but wonder if there won't be a followup move there, as Global Crossing has surely noticed the synergies Level 3 seems to be getting from the combination of Vyvx, CDN, and fiber. Edgecast wouldn't cost them that much...
Global Crossing will hold their earnings call tomorrow morning, which means they will likely issue their numbers today after the market closes - if past patterns hold. Guidance for Q4 and beyond will include the results of Genesis Networks, so perhaps they will give us some insight into its revenue and EBITDA contribution at that time.
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