CenturyLink Buys Ciber ITO Biz

One of the leading integrated telecommunications service providers, CenturyLink, Inc. ( CTL - Analyst Report ) through its subsidiary Savvis Inc. is buying assets of Ciber, Inc.’s ( CBR - Snapshot Report ) information technology outsourcing (ITO) business.

Based in Greenwood Village, Colorado, Ciber is a global company engaged in information technology business consulting, and outsourcing services across 19 countries covering North America, Europe and Asia.

According to the deal terms, CenturyLink will pay $7 million to buy ITO assets from Ciber that include infrastructure, technology and facilities across several countries. The business deal is expected to close during the fourth quarter of the year, pending regulatory approvals.

The proposed acquisition is expected to aid Savvis’ existing ITO business by expanding its global reach as well as enhancing capabilities in cloud services and customer support. Savvis also plans to hire 750 Ciber employees.

The proposed agreement follows the existing partnership between Ciber and Savvis formed in 2011 that allowed Ciber to benefit from Savvis’ physical infrastructure of over 50 data centers and network build-outs. Ciber will continue to serve its clients with application development and outsourcing services, including system design, implementation and managed services supported by Savvis infrastructural facilities.

With the acquisition of Savvis, CenturyLink forayed into the cloud computing business, which is growing by leaps and bounds. The acquisition strengthened CenturyLink’s footprint in the hosting managed cloud services business with data centers in North America, Europe and Asia.

The company continues to expand data centers this year with a view to generate higher revenue growth in managed hosting and cloud services. These acquisitions bequeathed several additional benefits along with greater scale and operational efficiencies, providing the company with a competitive edge over market giants like AT&T, Inc. ( T - Analyst Report ) and Verizon Communications Inc. ( VZ - Analyst Report ) .

We maintain our long-term Neutral recommendation on CenturyLink Inc. The stock also has a Zacks #3 Rank, implying a short-term Hold rating.