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EarthLink Sheds MSP Business

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Global MSP Synoptek announced late Monday that it has acquired EarthLink’s IT services business, which generates $37 million in annual revenue, for a reported $29 million. The move affects some 1,700 EarthLink customers.

The addition of this business will add significantly to Synoptek’s 400 services customers and 25 employees, and follows closely on Synoptic itself being acquired by private equity firm Sverica Capital Management in November.

EarthLink's Olen ScottFor EarthLink, the $38 million generated annually by the services group was a small part of overall sales; the company posted total revenue of nearly $271 million in 2015’s third quarter alone. It also repurchased $30 million of outstanding debt in Q3. In its year-end guidance, stated goals were to drive improved cash flow, narrow its focus and work to deleverage its balance sheet. Diverting the MSP business should help EarthLink continue to zero in on its network services, security and cloud businesses, an area where it’s seeing success — since 2009, the company has dramatically reduced churn rates, from 4 percent in the first quarter of 2009 to less than 2 percent to close 2014.

More focus is good news for partners, Olen Scott, vice president, EarthLink partner channel, told Channel Partners.

“We anticipate only positive impact on our partner community at large,” said Scott. “The ITS portfolio of services was a small part of our business — $38 million of a billion-plus dollars; the channel percentage of that amount was smaller still. This strategic move will align those services and their support with a business partner whose core focus is IT services, resulting in an enhanced customer and partner experience.”{ad}

Scott went on to reiterate the message of EarthLink sticking to its cloud and network core.

“This necessary pruning of our product portfolio reduces any potential to dilute our focus on being the best network and cloud connectivity provider in the business,” he said. “Our channel partners’ understanding of and focus around our most strategic differentiators are as strong as it’s ever been, as evidenced by the numerous multiyear, multimillion-dollar awards secured by partners in just the past 60 days.”

Scott expects the sale to drive better alignment and focus across sales constituents and EarthLink solutions, and he’s open to discussion with concerned partners.

“To the extent there are specific partners particularly interested in focusing on IT services, we will be engaged and attentive to facilitating proper connections between them and Synoptek to ensure continuity of service offerings and partner experience,” he said.

In a statement, Synoptek CEO Tim Britt also said both Synoptek’s and EarthLink customers will be better served with more honed technology solutions, along with geographic diversity.

“We are enthusiastic about the Synoptek purchase of the EarthLink IT Services business,” said Britt. “This acquisition helps us continue our mission to become the best independent IT managed services provider in the market, and it supplements our ability to provide expert IT leadership and support services to our customers.”

Follow executive editor @LornaGarey on Twitter.


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