SBC buys stake in Concentric

The investment is part of a deal to integrate Concentric's Net-based business data services into SBC's services for business customers.

2 min read
SBC Communications, the second largest U.S. local phone company, today announced it will buy a 4 percent stake in Concentric Network as part of a deal to integrate Concentric's Internet-based business data services into SBC's portfolio of services for business customers.

SBC will either pay $24.15 a share to Concentric or buy the company's shares on the open market. SBC also has an option to purchase another 4 percent of its stock at a price of $21 within the next three years.

The agreement calls for Concentric and SBC to accelerate the use of a complete suite of packet-switched, Internet Protocol (IP)-based services such as virtual private networks (VPNs), Web hosting, shared software, and electronic commerce for business customers.

Concentric shares jumped higher on the news, climbing 6.51 percent to 22.5. The stock has traded as high as 41 and as low as 7.88 during the past 52 weeks.

Concentric has been in operation since 1994 and went public in August 1997. Although the company's initial public offering did not take off like those of some Internet-related companies, its stock today is trading well above its IPO offering price of 12 per share. Its current investors include Kleiner Perkins Caufield and Byers and Softbank Holdings, among others.

Shares of SBC also moved higher, rising 1.78 percent to 42.94. The stock has traded as high as 49.13 and as low as 30 during the past 52 weeks.

"Our arrangements with Concentric strengthen SBC's position in the exploding market for data services and provide us with the IP network scope and services to quickly meet our business customers' growing communications needs," said Mike Turner, executive vice president, corporate planning and capital management at SBC.

SBC said that this agreement is another step in its overall data strategy to strengthen the position of its units, Pacific Bell and Southwestern Bell, as top providers of data communications solutions.

"[SBC's] data business has grown approximately 33 percent a year and we are confident this relationship will significantly increase our ability to be the leading provider of data communications," Turner said.