EarthLink is selling off its IT services business to Synoptek for $29 million and turning its focus toward its core wholesale carrier and enterprise business services units. About 1,700 customers that are serviced through data centers and office locations in the continental U.S. and Canada will be affected by the sale.
EarthLink will continue its core business of providing a suite of managed and network services to business customers, including enhanced core data and voice services and carrier grade transport solutions.
News of this deal should not be of any great surprise, given EarthLink's stated desire to drive growth in its core business.
While not mentioning any specific deals, Joe Eazor told investors during the company's third quarter 2015 earnings call that it was looking at potential opportunities to shed units that weren't in line with its core business strategy.
"We also need to continue to refine and narrow our focus on products, services and opportunities where we can truly differentiate and win," Eazor said during the third quarter earnings call, according to a Seeking Alpha transcript. "In some cases this means walking away from revenue streams that are less profitable or too far afield from our core network expertise. We have done some of this and we will likely do more as we continue to sharpen our focus."
Eazor reaffirmed Earthlink's strategy, saying that the deal "also strengthens our balance sheet, simplifies our operations and provides us more flexibility to invest in new capabilities and services to drive growth in our core business."
The IT division falls in line with that strategy. EarthLink, which will announce its fourth quarter 2015 earnings on Feb. 18, reported that its IT services division was generating $37 million in annual revenue, which equates to about 3 percent of the company's overall revenues.
For Synoptek, the acquisition of EarthLink's IT assets will give the company an expanded set of capabilities and customer base.
Adding EarthLink's services organization to its fold, Synoptek said, will expand the skillsets, 24/7 coverage, and strategic IT sourced solutions for their joint customers. It also expands Synoptek's presence across the eastern U.S. and complements its national data center infrastructure. Synoptek will gain 1,700 new IT service customers, scaling its overall base beyond 2,100 total customers.
- see the release
- see this Seeking Alpha transcript
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