Metromedia Fiber Network Inc. Tuesday snagged SiteSmith Inc. in a stock deal
worth about $1.36 billion.
The purchase is a slam dunk for Metromedia Fiber Network, which has quietly
been rolling out scads of dark fiber, or, unused fiber optic cable, to firms such as StorageNetworks and WinStar, as well as significant expansion in Europe in the past couple of years.
The optical network specialist bought the infrastructure management services provider to give them an edge over rivals such as Exodus Communications Inc. in providing dark fiber for enterprise customers. Recognizing the growing demand by its customer firms to outsource infrastructure solutions, MFN said it bought SiteSmith to give it exactly that capability.
Nicholas M. Tanzi, president and chief operating officer of Metromedia Fiber
Network, said via a conference call Tuesday that this outsourcing capability
is the reason MFN will have a more complete solution than its competitors.
“The customer can now get can dark fiber and a complete suite of services,”
Tanzi said. “It will be help customers become uniquely positioned companies
that can make the jump from legacy platforms to the Internet. From soup to
nuts we’ve provided the perfect solution.”
Tanzi also said the combined company will offer its comprehensive managed
services with its unmetered, unshared fiber network connections at the local
loop, a globally connected fiber backbone network, Internet connectivity and
co-location data centers.
To its own end, SiteSmith provides customers with management solutions that
include design and architecture, hardware and software installation,
co-location and network connectivity, and ongoing management through
provision of 24×7 monitoring, security services and fail-over systems.
SiteSmith’s Chief Executive Officer Mark F. Spagnolo, who previously served
as president and CEO of UUNET, said SiteSmith will now have advantages over
such infrastructure rivals such as Loudcloud.
“Most other infrastructure firms don’t cover the server stack and they don’t
make sure the application is working,” Spagnolo said during a conference
call Tuesday. “They attack the market horizontally against that value stack.
They don’t have the breadth that customers are asking for. Customers have to
do their own management function. We will be able to do that for them.”
Under the terms of the deal, SiteSmith shareholders will receive between 55 million and 62.5 million MFN shares depending on the share price of MFN common stock over a period prior to closing. The transaction will be accounted for as a purchase transaction.
But whether or not the purchase should help the firm’s tumbling stock remains to be seen. Last month saw many stocks in the telecom sector plunge, with Metromedia taking a 50 percent stock price decrease on the chin. Analysts say that while potential slowing in capital expenditures and drops in funding have lead to bearish sentiment on the market, the outlook for Metromedia is very favorable. On24 analysts project long-term growth and exapnsion for the dark fiber provider, and place the firm’s future stock range in the low- to mid-40s.
MFN will absorb more than 400 employees, 169 customers and 8 locations in
the U.S. and Europe. The transaction is expected to close by the end of the
year and is subject to customary conditions.
Two deals that made much more noise for MFN include its $1.65 billion
purchase of Bell Atlantic in October 1999. In that deal, Bell Atlantic also invested $1.7 billion in the then surging firm en route to claiming a 19 percent stake.
