Time Warner Cable Business Class, a division of Time Warner Cable (TWC), is all set to launch cloud based Software as a Service (SaaS), which will provide secure and cost effective software and communication solutions to small and medium business enterprises (SMBs). We believe this latest offering from Time Warner Cable is targeting the online software service business of the lucrative SMB market.
This cloud based solution will offer SMBs with a software infrastructure capable of supporting large enterprises and will help eliminate the cost and complexities of owning and managing their own equipment and employees.
Some of the notable benefits of this service are that it provides access to e-mail, contact lists and important documents on multiple devices including PC, smartphones and tablets in addition to providing round the clock customer services. Large size of IT infrastructure is an added advantage as it allows flexibility to businesses to adapt to changing needs.
Cloud based services business has been on the growth path for quite some time as it significantly reduces the operational cost of enterprises by providing secure and affordable data management solutions, thereby enhancing business productivity. To tap this market, Time Warner has acquired cloud services provider Navisite for $230 million in February 2011.
The Business Segment has become a major growth driver for Time Warner Cable. In the second quarter 2012, Business Service Segment generated revenue of $464 million, up 28.5% year over year. Arch rival Comcast Corporation’s (CMCSA) business service revenue in the second quarter of 2012 has shown a growth of 34.2%.
We believe Time Warner is betting on SMBs to tap this latest service as it will reduce their IT spending, which in turn will further pump up the cable operator’s business service revenue. Furthermore, it will allow Time Warner to compensate its market share loss from telecom carriers like Verizon Communications Inc. (VZ) and AT&T Inc. (T) in the cable and broadband segment.
We maintain our long-term Neutral recommendation on Time Warner Cable. The company also retains a Zacks #3 Rank, implying a short-term Hold rating.
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