Cbeyond Projects Little Growth as Company Realigns Sales

By Josh Long

Cbeyond Inc., a managed services provider focused on small and mid-sized businesses, announced last week that it expects relatively nominal growth in 2012 as the company cuts half of its entry-level direct sales force under a broader strategy to focus on certain areas including cloud services.

For 2012, Cbeyond forecasts revenues of $485 million to $495 million. Cbeyond’s 2012 revenues will remain flat or barely grow if its projections prove to be accurate. That’s because Cbeyond anticipates reporting 2011 revenues of $485 million.

In conjunction with its preliminary fourth-quarter and 2011 fiscal results, Cbeyond also announced significant changes to its distribution channels in order to capitalize on 2010 cloud-related acquisitions and better serve what the company refers to as “the growing number of technology dependent small and medium sized businesses (SMBs).” The service provider said it’s cutting roughly in half its entry-level direct sales force while establishing two new direct sales groups. Cbeyond didn’t specify the size of its direct sales force.

One of the new sales groups will be focused on developing opportunities selling cloud services while the other group will zero in on “managing both existing and new technology dependent customers,” Cbeyond said.

Cbeyond attributed its modest 2012 revenue projections to its decision to trim its sales staff.

“The flat-to-low growth in revenue we predict for the year is a function primarily of the reduced staffing levels in our traditional communications-centric sales force this year while Cbeyond ramps new distribution channels focused on technology dependent customers throughout the year,” the service provider said.

Channel Partners is awaiting an interview with Cbeyond’s channel chief for more details on how Cbeyond’s strategies will affect agents.

“Cbeyond will continue to supplement its direct sales efforts with channel partners, its upselling group, and its wholesale program for its cloud offerings,” the company said Thursday in a press release. “The net effect will be to slow growth in its traditional BeyondVoice product suite, while increasing revenue from higher ARPU, technology dependent customers.”

Cbeyond plans to spend half of its estimated $55-$60 million in 2012 capital expenditures on cloud and network capabilities. The Atlanta-based company is banking on a strategy of offering cloud services over its own managed broadband connections. Cbeyond has set a target of lighting fiber to 1,000 buildings by late 2013 through agreements with its network partners. The service provider anticipates that by the end of next year one quarter of its revenues will be derived from cloud-only customers and customers that buy both cloud and network services.

Cbeyond ended the year with 62,169 customers in its 14 Core Managed Services operating markets. The company added 1,044 customers in the fourth quarter, representing a 9.1 percent increase in subscribers year over year, while churn grew to 1.4 percent from 1.3 percent in the same period a year ago.

For more preliminary results, click here. The company said it will release its full financial results in connection with the completion of an annual audit.