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CenturyLink Buys SEAL to Strengthen Enterprise Solutions


Recently, CenturyLink Inc. CTL, a leading regional telecom service provider, acquired Seal Consulting, a US-based SAP products provider for enterprise-wide business and technology needs. The financial terms of the deal were not disclosed. This acquisition will enhance the company’s integrated application transformation capabilities.

Seal Consulting has deep expertise in implementing a wide spectrum of SAP products. These include SAP ECC, SAP S/4HANA, SAP Business Suite, SAP BW/4HANA, SAP Ariba, SAP Hybris, SAP CRM, SAP Basis, SAP Security, SAP Fiori, SAP Manufacturing Integration and Intelligence, plus products across supply chain management (SCM) and governance, risk and compliance (GRC).

The acquisition will broaden CenturyLink’s hosting and cloud infrastructures platform. Earlier, the company acquired Orchestrate, which enhanced its Cloud platform with a Database-as-a-Service (DBaaS) offering. Further, it acquired disaster recovery specialist DataGardens. Moreover, acquisitions of Tier 3 and Platform as a Service (PaaS) provider AppFog improved CenturyLink’s cloud application capabilities.

Notably, in Oct 31, 2016, CenturyLink entered into a definitive agreement to acquire Level 3 Communications Inc. LVLT for a total consideration of approximately $34 billion including debt. The equity value of this deal is approximately $25 billion. The deal is anticipated to be completed in the third quarter of 2017, subject to customary regulatory approvals.

Both CenturyLink and Level 3 Communications provide communications services like data, voice and video transmission for large enterprises. Notably, Level 3 Communications is the provider of one of the largest Internet backbone in the world. However, in recent years, both the companies have been struggling to maintain their business momentum after facing severe competitive threats from large telecom operators such as Verizon Communications Inc. VZ, AT&T Inc. T and Comcast Corp. CMCSA.

Price Performance of CenturyLink

In the last one year, the stock price of CenturyLink has witnessed a growth of 4.60%, underperforming the Zacks categorized U.S National Wireless industry’s growth rate of 24.91% in the same time period. The company is currently going through a difficult phase. Management provided a dismal outlook for 2016 which can be largely attributed to persistent pressure on wholesale revenues along with high employee and benefit costs due to severe competitive pressure from larger peers.

However, the proposed acquisition of Level 3 Communications and deployment of high-speed Internet services in the underserved rural areas may help the company to regain its lost glory. We believe these are primary reasons behind the stock currently carrying a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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