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Indirect Channel Contributes to tw telecom’s Growth

Revenues at tw telecom inc. rose in the third quarter, thanks at least in part to the indirect channel.

During a call with analysts Tuesday, tw telecom Chief Executive Larissa Herda said the indirect channel has been contributing to growth, although she declined to reveal specific sales numbers.

The channel is “a small group,” Herda said, “but they’re making a big impact on growth.”

The channel program has been in place for about a year and a half.

“They are an extension of our sales organization. Our analysis shows that the vast majority of the revenue that they’re bringing in is incremental to what our sales group would be doing,” Herda said. “That’s one of the issues that a lot of companies have where the indirect sales channels have the conflict with their sales force. We definitely didn’t want to create conflict, we want it to become complimentary.”

Herda said tw telecom was “selective about the partners that we’ve chosen … and we’re building very good strong relationships with them.”

Revenues Grow

Littleton, Colo.-based tw telecom, which provides managed voice and data networking solutions to businesses, reported a quarterly profit of $14.6 million on revenues of $344.5 million. Those results compared to net income of $16.1 million on revenues of $320.3 million in the year-ago period.

“Enterprise customers and our data and Internet services continue to be our growth engine, while carrier customers provide ongoing opportunities but also contributed to some lumpiness in revenue this quarter,” said Herda, who also serves as the company’s chairman and president.

Mark Peters, executive vice president and chief financial officer of tw telecom, said the communications company serves nearly 40 percent of Fortune 1000 companies, and there is plenty of opportunity for growth.

“We generally only service [a] small portion of their needs, so this category of customers provide a lot of future sales opportunities,” he said.

Tw telecom ended the quarter with $469.1 million in cash, equivalents and short-term investments.

“Our ongoing comprehensive performance and results put us in a strong financial position and provides flexibility to invest in the business, repurchase shares and consider strategic initiatives,” Peters said. “Throughout this year, we’ve continued to invest for organic growth, made some opportunistic purchases of fiber and conduit and also completed our $50 million share buyback program this quarter.”

M&As in the Cards?

Herda said that tw telecom has been growing organically but she didn’t rule out the potential for a merger or acquisition.

“We are very active and looking at opportunities and if we found something that meet our criteria, we would be opportunistic,” she said. “The good news for our business is that we are growing very nicely organically. A lot of the companies that you see that have been consolidating haven’t been growing, so consolidation is really probably they only way they can get to growth.”

Tw telecom’s stock price (TWTC) closed at $17.75 on Wednesday on the NASDAQ.


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