Windstream remains mum on data center sale rumors, says cloud services are critical

A Windstream executive would not confirm the company is going to sell off its data center business, Hosted Solutions, debunking rumors that emerged in August that a deal was forthcoming.

Speaking to investors during the Bank of America Merrill Lynch 2015 Media, Communications & Entertainment Conference, Bob Gunderman, CFO of Windstream, said that the data center and cloud services business is a tool it needs to compete for enterprise services contracts.

"We certainly heard the rumors and we don't comment on M&A rumors, but what I would say is cloud services, managed services and data center services are a critical part of our portfolio," Gunderman said. "We're a large enterprise provider partner without having those capabilities."

In August, a report in Bloomberg emerged that the telco has hired Royal Bank of Canada to help it sell the division with hopes of raising $500 million to $750 million.

Among the potential parties cited by unnamed sources that might have an interest in purchasing Windstream's Hosted Solutions are private-equity players ABRY Partners and GI Partners.

Although he would not address such an asset sale directly, Gunderman said that the company is always examining its portfolio of assets, including the data center business.

"We do routinely do look at our set of assets to assess valuation, whether there's disparity between the parts of our business relative to what other businesses alone might trade at," Gunderman said. "I think it is incumbent on us to do that by paying attention to shareholder value."

Enterprise IP-based solutions and next generation data and enterprise services continue to be big sellers for Windstream with revenues rising 3.5 percent year-over-year to $485 million during the second quarter of 2015.

Regardless if a sale of the data center and cloud business happens, Windstream said that it will continue to work with other partners such as HP and Salestream Software to bring other value-added services to business clients that it has not developed itself.

By joining HP's PartnerOne Program, Windstream will deliver hosted solutions built on HP Helion and infrastructure platforms for its growing cloud customer base. This relationship enables Windstream to not only deliver HP solutions to its customer base, but also extend its Hosted Solutions data center and cloud services to HP customers, for example.

"Whether we're a long-term owner of our data center business or if at some point in the future we decided to do something differently, we're comfortable in operating under a structure where we can bring services for the benefit of our customers where Windstream has been the lead integrator to ensure that it's a great solution," Gunderman said. "We do that every day and we do that in our data center business where we have a number of third party services that we don't actively deploy on our own. But we integrate that solution into the broader data center product set and manage that for the customer."

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