Windstream says its recent acquisitions of EarthLink and Broadview will enable the service provider to offer a broader array of SD-WAN and Unified Communications as a Service (UCaaS) offerings to its small to medium-sized business (SMB) customer base.
Prior to the acquisition announcement by Windstream, Broadview had been increasingly transforming its customers from legacy TDM services to cloud-based UCaaS.
UCaaS is heading on a strong growth trajectory. According to IDC, the UCaaS market is set to grow from $38 billion to a $43 billion market by 2020.
Tony Thomas, CEO of Windstream, said UCaaS are a good fit for SMB customers that lack the IT resources to manage on-premise solutions.
“UCaaS products are well suited for SMB and middle market enterprise customers, making it an ideal technology for Windstream,” Thomas said. “Unified Communications platforms are also highly complementary to SD-WAN, providing a seamless product offering for our customers.”
Thomas added that Broadview brings an “experienced sales force in conjunction with a strong channel partner program which will leverage to drive UCaaS penetration across our SMB and middle market enterprise customer bases.”
Likewise, Thomas sees EarthLink which was one of the early SD-WAN providers, positions Windstream to take advantage of SD-WAN growth. While still a nascent market, IDC forecast that SD-WAN will grow to be a $6 billion market by 2020.
“SD-WAN is another next-generation solution that represents a tremendous opportunity for Windstream,” Thomas said. “EarthLink was one of the early adopters of SD-WAN technology that is rapidly becoming a managed service offering, and Windstream is well positioned to take advantage of this transformational platform.”
Thomas added that “we expect SD-WAN will be a lead product for SMB and medium-sized business segments.”
Windstream’s overall results were again a mixed bag as the telco saw gains in the enterprise and CLEC consumer/SMB segment, while wholesale declined as more customers migrated from TDM to Ethernet.
Here’s a breakdown of Windstream’s key metrics:
ILEC/ SMB: ILEC consumer and small business service revenues were $391 million, down 1.5% from the same period a year ago, and contribution margin was $222 million compared to $228 million year-over-year.
CLEC consumer/SMB: CLEC consumer and small business service revenue was $140 million, a 9% increase year-over-year, and contribution margin was $49 million compared to $41 million in the same period a year ago.
Enterprise: Enterprise service revenues were $516 million, a 5% increase from the same period a year ago, and contribution margin was $83 million compared to $71 million year-over-year.
Wholesale: Wholesale service revenues were $158 million, down 3.5% year-over-year, and contribution margin was $108 million compared to $118 million in the same period a year ago.
Financials: Total revenues and sales were $1.37 billion and total service revenues were $1.34 billion in the first quarter. Operating income was $46 million compared to $158 million in the same period a year ago.
The company reported a net loss of $111 million, or 89 cents per share, compared to a loss of $232 million, or $2.52 cents per share a year ago.