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Cloud Services

CenturyLink Dials Back Growth Expectations

CenturyLink Inc. is backing off growth projections for the rest of 2013 and into 2014, telling analysts during its second-quarter earnings conference call late Wednesday that data hosting growth isn't accelerating as quickly as once thought, while revenues from lower-speed Internet services are declining faster than anticipated. (See Cloud Sales Up, Broadband Down at CenturyLink.)

As a result, CenturyLink revised its full-year operating revenue projections from the previous range of US$18.1 billion to $18.3 billion to $18.05 billion to $18.20 billion.

Despite reporting net income growth compared with a year ago -- $269 million compared with $74 million for the second quarter of 2012 -- CenturyLink executives pointed to numerous negative turns. The company saw less take-up than expected of savvisdirect, the Web-based cloud service launched in December 2012 to compete against Amazon and Rackspace, among others, in the commodity cloud business. Stewart Ewing, executive VP and CFO, said the new service fell about $20 million short of sales expectations. (See CenturyLink Takes on Amazon in the Cloud).

In addition, sales of lower bandwidth services were off $30 million and federal Universal Service contributions dropped $25 million to $30 million.

In total, second-quarter revenues were down 1.9 percent year-on-year to $4.53 billion.

Rounding out the negative news was a net decline in broadband customers of 8,400 to a total of 5.91 million, a number Ewing attributed primarily to seasonal shifts, such as "snowbirds" (temporary residents) leaving areas such as Arizona, and college students moving as well. In addition, however, one indirect sales partner was reported to have significantly underperformed.

On the positive side, CenturyLink's fiber-to-the-tower buildout is expected to generate revenues from mobile network operators that are migrating away from copper-based backhaul services, while the operator's managed hosting services grew by 21.7 percent year-on-year to $134 million, although some of that (about $15 million) reflected sales by Ciber, the company acquired in the fall of 2012.

The operator also continues to expand its fiber-to-the-premises footprint and its PrismTV IPTV service. (See CenturyLink Uses Omaha as 1gig Test Bed).

— Carol Wilson, Editor-at-Large, Light Reading

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