SBC's Little Big Deal -- Market Applauds Concentric Plan
Feb. 22, 1999 (LTH - CMP via COMTEX) -- SBC Communications Inc. was busy again early this month,
grabbing serious headlines for its move to strike a strategic alliance with Williams Communications Group Inc.
(Tulsa, Okla.). That $500 million deal to give SBC low-cost access to Williams' fiber optic network certainly
raised a few eyebrows, but that's not all SBC was up to in early February.
All but lost in the hubbub over the Williams announcement was a smaller but also intriguing deal that saw SBC
pick up a $19.5 million, 4 percent stake in Internet service provider (ISP) Concentric Network Corp. (San Jose,
Calif.).
As with the larger deal, the Concentric purchase is all about positioning. SBC wants to integrate Concentric's
Internet-based services-including high-speed dedicated and digital subscriber line (DSL) access, Web hosting
and e-commerce services-with SBC's portfolio of data services to more effectively tap into the midsize business
market. The plan, which allows SBC to purchase another 4 percent share of Concentric by 2002, also calls for
SBC to provide the telecommunications link between business customers and Concentric's points of presence
(POPs).
Both moves are seen as underscoring SBC's aggressive growth mode and, many argue, puts it at a competitive
advantage over other Bell companies. In recently upgrading its position on SBC from "hold" to "buy,"
investment firm Salomon Smith Barney Inc. (New York) reports: "We believe the telecom landscape is
changing and those Bells that aggressively pursue out-of-region opportunities will be in the position to offset
share loss in-region. We think SBC fits that bill."
The stock market apparently thought so, too: SBC shares gained about 4 percent right after the deals, pushing
near $52 at press ti |
