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Scott Miller: Bluebird Network submitted the highest offer for CU's data center.
Scott Miller: Bluebird Network submitted the highest offer for CU's data center.

CU SpringNet sale nets $8M

Posted online
The Bluebird gets the worm.

City Utilities of Springfield concluded a three-year process to sell its SpringNet Underground data center with an $8.4 million deal Dec. 5 to Bluebird Network LLC.

The Columbia-based high-speed data management company offered the highest of three viable buyout bids, surpassing Springfield-based ISG Technology LLC’s $5 million pitch and New York private-equity firm Seaport Capital’s $5.5 million offer.

“You have to do your due-diligence for everybody that’s out there, and it met the criteria that we needed to look at somebody to come in and take it on financially,” CU General Manager Scott Miller said of Bluebird. “And then it had the best offer.”

The deal represents the transfer of CU’s physical server racks, cages and associated mechanical equipment, its 82 client contracts and a lease with privately owned Springfield Underground.

The center serves the data storage needs of some of the Springfield area’s largest businesses, including CoxHealth, Springfield Public Schools and the Springfield Area Chamber of Commerce. Formerly part of CU’s broadband division, Miller said SpringNet Underground garnered revenues of $3.5 million in fiscal 2014, ending Sept. 30.

CU officials put the data center up for sale after determining it would require millions of dollars in investments for adequate storage space and backup capabilities down the road.

Bluebird Network President and CEO Michael Morey said SpringNet Underground – now officially named Bluebird Underground – gives the growing broadband provider a new revenue stream with its first external data center.

Bluebird Network maintains two data centers for internal use, but the new division in Springfield represents its first commercial data storage operation. It was an attractive buy for Bluebird, which ranked No. 4,290 on Inc. magazine’s 2014 Inc. 5000 with three-year revenue growth of 65 percent, because it complements existing services. The company posted 2013 revenue of $29.2 million.

“Bluebird’s primary business has been to provide communication services over our fiber-optic network across Missouri, Illinois and the surrounding area,” Morey said. “The way people get onto those networks is that we either build to them, like with wireless towers or building to customer business sites, or they come to us. Sometimes, communications service providers will connect to us at one of our points of presence. There is a third way now to get on our network and that is to locate your servers and data equipment inside our co-location facility.

“This allows us to have another way for people to access and use our network throughout the Midwest.”

The company delivers high-speed broadband access to businesses and others that might not otherwise have access.

“We have a strategic advantage in rural areas. In addition to connecting to major cities – Springfield, St. Louis, Chicago, Springfield, Ill., Memphis, Tulsa, Des Moines – we also connect to the second-, third- and fourth-tier cities throughout rural Missouri and Illinois,” Morey said. “We have the ability to connect metropolitan markets to the rural markets.”

With cities such as Nixa considering their own gigabit futures and cable companies such as Mediacom working to expand rural broadband networks, Morey said Bluebird is a potential provider for them. The telecommunications company provides 6,000 route miles of high-speed broadband and fiber optic connections in the Midwest.

Last year, CU hired St. Louis-based real estate brokerage Cassidy Turley to sell the data-storage unit that had drummed up a dozen potential buyers as of January.

Morey said Bluebird plans to at least match the $8 million purchase price in investment to expand Bluebird Underground. CU officials had projected an initial upgrade investment of some $16 million and another as much as $60 million.

“We realized several years ago that we were struggling to raise the capital for an expansion. The business was doing quite well, so in August 2011, the board told us to go explore different options,” Miller said.

Bluebird’s first-year plans are to double the usable data-storage space – by around 11,000 square feet. The Bluebird Network connection is expected to lead to other business crossover.

“Let’s say you are a hospital that wanted to have your data-center equipment within our data center. Well, you’d need to connect that to your various hospitals and the strategic advantage for us in selling them that space for colocation in the data center, is that we can also sell them to their various hospitals,” Morey said. “That is a potential revenue source that Bluebird didn’t have before.”   

The utility provider’s business-focused broadband services firm, SpringNet, was not part of the sale to Bluebird.[[In-content Ad]]

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