Hosted Solutions Acquired for $140 Million

Regional data center specialist Hosted Solutions has been acquired by ABRY Partners for $140 million, the two companies announced Tuesday. The deal is the second acquisition of a regional provider by ABRY, a Boston-based private equity firm that bought Houston’s CyrusOne last July. The Hosted Solutions management team will continue to lead the company from the company’s Raleigh, NC headquarters.

“This is an incredible milestone for our business,” said Rich Lee, founder and CEO of Hosted Solutions. “Partnering with ABRY Partners provides us with the capital to fulfill our vision and accelerates our strategic growth plans.”

ABRY has completed more than $21 billion in transactions, and has invested in expansion at CyrusOne, which has added space to its Houston facility and just announced a new Dallas data center.

Qwest Buys OnFiber for $107M

The bandwidth consolidation continues. Om Malik notes that Qwest has acquired OnFiber for $107 million in stock. Om also notes that the company has obtained at least $146 million in venture funding over the years. At various times, OnFiber has been backed by leading firms such as Kleiner Perkins Caufield & Byers, Incepta, Bear Stearns Merchant Banking, Telesoft Partners, Amerindo Investment Advisors, and GE Capital.

Back in 2002, OnFiber was itself an acquirer, acquiring Sphere Networks and Telseon as it built optical Ethernet networks in major metro markets. In 2004 it acquired the skeleton of Enron’s broadband operation.

Profitability.net Acquires DataSuites

In a deal that combines Cincinnati area data center providers, managed services company Profitability.net said today that it has acquired CNSGroup LLC and its wholly owned subsidiary DataSuites LLC, which provides secure private data center environments. The deal provides Profitability.net with an existing 11,000 square feet of data center space and 12,000 square feet of expansion space.

“This acquisition supports our growth plan to be the first choice among local executives and IT professionals for data center space and managed services,” said Aaron Larkins, President of Profitability.net. “DataSuites provides us with a $6+ million dollar data center infrastructure that will be used as a primary or disaster recovery facility for our clients.”

Profitability.net provides colocation, cage suites, enterprise hosting, and a wide range of managed services including security, disaster recovery, monitoring and email archiving for compliance. With the new facility, Profitability.net can now serve larger clients who require a significant amount of secure datacenter space for their operations. Profitability.net will also use the facility to develop new partnerships with IT service providers who need a data center partner.

Watching The AT&T-BellSouth Deal

There’s tons of media coverage on the AT&T-BellSouth deal, much of which is focusing on the “back to the future” angle and competitive issues. Several stories have noted the companies’ announcement that they’ll realize $2 billion in savings while consolidating their operations. This is bound to affect some leases, although the near term focus would probably be on office space rather than data center space, since the office leases can be analyzed and consolidated more quickly.

Among those watching the deal carefully will be the folks at Digital Realty Trust, as AT&T is among their largest tenants, with seven leases spanning 289,343 square feet, according to recent SEC filings by DRT. Both companies have substantial web hosting operations, including AT&T’s advanced hosting unit, which is a dominant player in the fast-growing world of massively multiplayer online games (MMORPGs). AT&T provides hosting for World of Warcraft (6 million users) and some Sony Online games, and recently signed a large deal with Microsoft to host MMO content for Xbox Live. That fact, plus the broader growth trends we’ve discussed here in recent weeks, probably provide some protection for data center space.

Is Level 3 Buying at the Bottom?

According to telecom research firm TeleGeography, Level 3 is not just buying fiber at the bottom of the ocean, it’s buying at the bottom of the market as well. In an analysis titled 600 Billion bits Across the Atlantic, TeleGeography  says Level 3’s purchase last week of up to 600 Gbps of capacity on the Apollo trans-Atlantic submarine cable system - the single largest purchase of lit subsea capacity ever by an individual carrier - is a sign that bandwidth deals may never get better any cheaper. “This purchase is a big step by Level 3,” said TeleGeography analyst Alan Mauldin. “They recognize that prices are at unsustainably low levels and that they are confident in their networks’ need for a significant amount of additional capacity over the long-run.” You can read more at TeleGeography’s web site.

E Solutions Buys Former Genuity Tampa Center

Tampa colo provider E Solutions Corp. has continued its strategy of growth by buying distressed assets, doubling its data center space at Park Tower by purchasing the Genuity facility at the building from Level 3 Communications. E Solutions original 16,000 square foot data center was acquired at a deep discount from Fourthstage Technologies/Aperian.No terms were disclosed for the sale of the Genuity site, which was built by GTE for a cost of $12 million

ACS Takes Itself Off The Market

Shares of Affiliated Computer Services Inc. (NYSE: ACS) slid today after ACS said it was unable to come to terms on a sale of the company to a group of private-equity investors. The company said it would take itself off the market, prompting shares of ACS to drop 7 percent, closing down $4.32 at $56 a share.

ACS had been rumored to be in talks with an investor group including Blackstone, Texas Pacific Group, Bain Capital and Silver Lake Partners. The Dallas-based firm has 55,000 employees and reported revenue of $4.35 billion in the fiscal year that ended June 30.

Infocrossing Sells Two Data Centers for $25M

Infocrossing  has executed a $25 million sale/leaseback agreement for two data centers it acquired with its purchase of (i)Structure from Level 3 last month, according to an SEC filing by the company . LSAC Operating Partnership L.P. will purchase an 88,000 square feet in Omaha Nebraska and 60,000 square foot data center in Tempe, Arizona and then lease the facilities back to Infocrossing for 20 years. The sale price for the Tempe property was disclosed as $12.15 million, meaning the larger Omaha property was valued at $12.85 million.   

On Dec. 1 Infocrossing closed on an $82 million deal to buy (i)Structure, an IT outsourcing provider that had been a subsidiary of Level 3 Communications. The (i)Structure deal is expected to add approximately $76 million to Infocrossing’s gross revenue over the next year. Prior to the deal, Infocrossing had five data centers totalling 150,000 square feet of space. The Tempe and Omaha centers were the only two facilities owned by (i)Structure.

Buyout Deals Rumored for Computer Sciences, ACS

Hewlett-Packard and the private equity firm The Blackstone Group are working together on a buyout offer for Computer Sciences Corp., the Wall Street Journal reported this morning, saying a deal price could approach $12 billion. The Journal story requires a subscription, but CNN has a summary.

That’s not the only deal cooking, either. The Journal says an investor group including Blackstone, Texas Pacific Group, Bain Capital and Silver Lake Partners could announce the acquisition of Affiliated Computer Services as early as Monday. Why all the suddent activity in the sector? The Journal’s analysis:

Private-equity players have been diving head-first into the business of computer outsourcing, in which corporations contract out their computer-maintenance and operations to the likes of CSC. The outsourcing companies generate huge streams of cash, a quality that private-equity firms seek because they can then put a lot of debt on the companies they acquire and produce greater returns for their investors. At the same time, though, these outsourcing companies are in a highly competitive market that is being transformed by low-cost providers in India and throughout Asia.

Both CSC and ACS operate significant networks of data centers, so any buyouts could lead the acquirer to assess the cost-effectiveness of the networks, particularly if the buyer (HP, for example) may have data centers of its own in some of those markets. Stay tuned … we should hear more about both of these deal stories in coming days.

Hosting.com Buys XO Irvine Data Center

Hosting.com has bought a California data center from XO Communications, the two firms have announced. Hosting.com, previously known as Express Technologies, did not disclose the sale price for the 36,000-square-foot square data center in Irvine, Calif. The company has existing facilities in Boston and its home base of Louisville, Ky. Hosting.com will add 15 positions as a result of the acquisition, according to president and CEO Darren King, who said the deal was financed by Harbinger Mezzanine Partners LP. He said the funding is in addition to the $3 million capital infusion Hosting.com received from the Nashville-based investment firm in early 2004.

The Irvine center, which was built at N+2 redundancy by XO, is only about 20 percent occupied at present.