Time Warner Cable Jumps on the Cloud Bandwagon with NaviSite Acquisition

Event Summary

February 1, 2011 – Time Warner Cable Inc. and NaviSite, Inc. announced that they have entered into an agreement under which Time Warner Cable will acquire NaviSite, a provider of hosting, managed application, messaging and cloud services, for $5.50 per share in cash, or a total equity value of approximately $230 million.The acquisition provides Time Warner Cable Business Class, Time Warner Cable’s commercial services business, an immediate presence in the managed services market with NaviSite’s more than 1,200 customers.

Quick Take

Analytical Summary

• Current Perspective: Moderate on Time Warner Cable’s pending $230 million purchase of hosting provider NaviSite, because for a very reasonable price (just over the company’s $207 million market cap), the operator gets a fast path into more advanced managed data center services than it already offers, including cloud solutions. However, the acquisition puts Time Warner Cable into a business that is outside its wheelhouse, making success far from guaranteed.

• Vendor Importance: Moderate to Time Warner Cable and its Time Warner Cable Business Class (TWCBC) services arm, because in a market that demands more sophisticated and cost-effective solutions from service providers, the acquisition will supply TWCBC with a mature managed services business that the company can use as a foundation for offering more advanced solutions to both existing and prospective clients.

• Market Impact: Low on the managed services segment, because while the pending acquisition is stimulating speculation on further consolidation in the data center market, with a number of larger hosting providers considered good targets, approval of this deal is unlikely to have an effect on the market as a whole because TWCBC is likely to leave NaviSite mostly intact and little will change in the competitive playing field.

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Competitive Strengths and Weaknesses

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Analytical Perspective

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