2 Blockbuster Deals

Peter : On Rad's Radar?
| Peter Radizeski of RAD-INFO, Inc. talking telecom, Cloud, VoIP, CLEC, and The Channel.

2 Blockbuster Deals

The VADs (value added distributors) are feeling the pinch of the growth of cloud, SAAS, SD-WAN, managed services - amid the decline of laptops, PCs, hardware and software licensing.

Last year, Tech Data negotiated to acquire Avnet Technology Solutions for $2.6 billion. Avnet TS brings in $9.65 Billion in revenue and will increase Tech Data's share of data center revenue from just 29 percent to 45 percent. This move also gives Tech Data a presence in Asia-Pacific.

Tech Data competes with Ingram, ARROW, SYNNEX, Westcon-Comstor and to a lesser extent Jenne, ScanSource and CDW.


"Westcon has struggled in recent quarters, with revenue falling 10 percent to $2.26 billion and earnings before interest, taxation, depreciation and amortization (EBITDA) falling 18 percent to $42.9 million," according to reports. This is not unusual in the VAD space. ScanSource and other VADs have been facing declining revenue and margins due to the turbulence of the IT space.

"SYNNEX has reached an agreement to buy the North American and Latin American Westcon-Comstor business from Datatec," according to Seeking Alpha. The financials of the deal are complicated and range between $715 and $915 million depending on earn out.

Most analysts have commented that this is a as good a fit (Westcon+Synnex) as TD-AVnetTS. It fills in holes both in line cards as well as geography.

Consolidation is happening at every level of the IT/tech/telecom sector. Less choice for the partner and customer is one result. The other is usually a disorganized organization.

The other blockbuster deal is in the Data Center space. Digital Realty Trust (which acquired TELX) is now buying data center wholesaler DuPont Fabros for $7.6 billion. "DuPont Fabros operates 12 data centers in three major U.S. markets, including Silicon Valley and Northern Virginia, while Digital Realty operates 145 data centers globally." Dupont Fabros is the data center landlord to Yahoo, Facebook, Apple and Microsoft. Those are nice tenants to have if you are DRT.

This is more than either CenturyLink or Verizon received for selling their data center business. C-Link sold 57 data centers to a group of PE firms for $2.15 billion and a piece of the new firm (now known as Cyxtera Technologies). Cyxtera is a combo of Savvis and Qwest data centers that C-Link paid much more than the $2.5B C-Link paid just for Savvis. (Buy high sell low!) VZ sold its 24 data centers to Equinix for $3.6 billion, which it bought from Terremark for $1.4B.

Dany Bouchedid, CEO of COLOTRAQ, the data center master agency, said, "This definitely establishes DLR in the wholesale colocation space more than ever. Dupont's data centers are enormous with next gen gear and mechanicals. In addition, Dupont owns their PPE (property plant and equipment) with some of their sites having a decent amount of land. Their PUEs are industry leading and their cooling and UPS technologies are ahead of their time. DLR will be a great platform for them to further market their capabilities."

Data Center is still a hot sector with PE firms swooping in as well as consolidation by the REITs.

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