Amidst my travels this month, I missed a few items indicating that Windstream is shopping its data center and hosting business. The latest is from Gary Kim over at IP Carrier, but it seems to have been bubbling through the cracks for a couple of weeks now.
Windstream bought Hosted Solutions back in 2010 as the cloud and colo part of its business revenue push. They then added some additional square footage in North Carolina and elsewhere while adding various enterprise services to the portfolio. This past week we saw them take a step onto a new path, partnering with HP and its cloud ecosystem.
By putting their own data center and cloud footprint on the market, Windstream is signaling that it doesn’t think it can scale it to compete properly in an increasingly competitive cloud market, and would therefore rather jump on someone else’s capex bandwagon for that side of things. They’ll likely use the proceeds to continue reducing debt and improving the balance sheet.
But it also leaves Windstream looking increasingly asset-lite. In the spring they spun off CS&L and with it much of their actual fiber and copper assets, leasing them all back of course but still.
So, on to the more pressing question: with the price tag said to be north of $500M, who would buy Windstream’s data centers? Rumors suggest they are looking for a strategic buyer more so than private equity, meaning they want a price that reflects potential synergies as well.
A REIT or a private equity group is still the likeliest possibility, perhaps, and there are many names on that list. But there is also the possibility that Zayo could be looking to follow up its Latisys buy with some more colo and cloud assets, and this could be an interesting way to do it. I can’t think of another network operator as likely though, the trend does seem to be in the other direction.
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