TierPoint Buys Windstream's Data-Center Business for Almost $600 Million

**Editor’s Note: Please click here for a recap of the biggest channel-impacting mergers in July-August 2015.**

Windstream on Monday confirmed what’s been water-cooler talk for weeks: It’s selling its data-center unit.

TierPoint, the cloud, colocation and managed-services provider, its buying Windstream Hosted Solutions, for $575 million in cash.

As part of the deal, the two companies are forging what they call an “ongoing reciprocal strategic partnership” that allows Windstream and TierPoint to sell their respective products and services to each other’s potential customers via referrals. The idea is to let Windstream put capital toward its core telecom services while continuing to offer traditional data-center services to enterprise customers across a larger area.

“Our focus is always going to be cloud-specific. That’s our next-gen model …” said Jason Dishon, Windstream’s channel chief, at Cloud Partners last month, commenting on potential Windstream mergers and acquisitions. “I foresee the way that we’re moving in the enterprise-services space, we have to have cloud in our environment. We have to have managed services. So no matter what happens, that is a huge piece of our business.”

That foresight was reiterated in a statement from Windstream’s top executive on Monday.

“Data-center services will remain an integral component of our enterprise-service offering,” said Tony Thomas, president and CEO. “We expect the divested data-center business to continue its significant growth under the leadership of TierPoint, and we look forward to partnering closely with them to provide advanced data-center services to our enterprise customers.”

“This is a great strategic fit for TierPoint and our customers,” said Jerry Kent, chairman and CEO for TierPoint. “Windstream Hosted Solutions and its employees have earned a reputation for providing excellent customer service and innovative enterprise-class solutions. We value these team members as a key asset in the acquisition and their expertise adds to our strength and focus on providing a superior level of customer care. We’re also very pleased to enter into a long-term strategic partnership with Windstream, allowing both companies to leverage the expertise and respective strengths of our organizations.”

Windstream’s hosted unit has brought in significant revenue for the Little Rock, Arkansas-based business communications giant, but is only responsible for a small portion of its parent company’s free-cash flow. Margins also have been a struggle, as competition from businesses focused wholly on data-center services is stiff. We would expect to see Windstream to use proceeds from the sale to pay off more of its debt.

Assuming it passes regulatory muster, expect the deal to close by the end of 2015 or early next year. It’s been approved by the boards of both companies.

We have requests for comments out to both companies about further impact of the sale on Windstream’s partners.

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