CenturyLink, VMware Extend Ties

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One of the leading integrated telecommunications’ service providers, CenturyLink, Inc. (CTL) has extended its partnership with VMware, Inc. (VMW) to include the latter’s vCloud Hybrid Service. CenturyLink is incorporating this new vCloud Hybrid services into its North American Savvis data centers.

The global market for cloud computing is on the rise and steadily creating a dominant position in information technology. According to market reports, the global market of cloud is moving at a cumulative growth rate of 30% and is expected to hit $270 billion by 2020. As a result, most of the technological companies including telecommunications are considering it as a future opportunity.

CenturyLink’s entry into the cloud market not only expands its service portfolio but also widens its reach beyond the local market. We believe that CenturyLink is gaining significant momentum in the enterprise market with the introduction of Savvis’ product lines. The acquisition of Savvis in 2011 resulted in revenue accretion and also expanded CenturyLink’s services beyond the conventional market of core local phone business.

CenturyLink currently has expanded its footprint in the hosting managed cloud services business to over 50 data centers in North America, Europe and Asia. The company continues to expand data centers this year with the aim to grow revenues in managed hosting and cloud services.

However, stiff competition from other telecom operators like LEAP Wireless International Inc. (LEAP) and Frontier Communications Corporation (FTR)as well as increased operating expenses resulting from acquisitions may impede the company’s growth trajectory.

CenturyLink has a Zacks Rank #3, implying a Hold rating.

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