Level 3 acquires Savvis' video networking division

Level 3 Communications will pay $135 million to acquire the content delivery network division of Savvis, improving its ability to deliver rich media such as Web-based videos over its Internet backbone, the companies said Tuesday.

Level 3 sells space on its global fiber optic network to customers like cable and ISPs who host Internet Protocol (IP) services, collocation, voice traffic, VoIP and broadband Internet connections.

Buying Savvis' CDN business will allow Level 3 to host rich media such as video, Web 2.0 applications, multiplayer online gaming and software as a service, Kevin O'Hara, company president and COO said in a news release.

"Level 3 already has a strong brand and capabilities in video distribution through its Vyvx business. With native CDN capabilities and with Level 3's highly scalable, industry-leading IP backbone, we believe that Level 3 will be able to bring additional value to all video-centric companies by delivering video in a more intelligent and comprehensive way to a broader range of destinations," he said.

Level 3 also hopes to become the only network provider to offer a full portfolio of CDN, IP transit, wavelengths, metro transport and collocation. The company will gain network elements, customer contracts and intellectual property from Savvis. Level 3 expects the deal to close in the first quarter of 2007, pending government approval.

Savvis' CDN group was founded in 1996 as Sandpiper Networks. Today, the division's 50 employees are based in Thousand Oaks, Calif., where they design services that improve the reliability and scalability of online content for customers such as Microsoft.

This is the third purchase in recent months by Level 3, which bought voice and data provider Broadwing for $1.4 billion in October, and Internet access provider TelCove for $1.2 billion in May.

Savvis will use the sale to finance a $200 million move to increase its managed hosting and collocation services. The company announced plans on Tuesday to develop four new data centers in Atlanta, New York, Washington, D.C. and Santa Clara, by the fourth quarter of 2007.

The IDG News Service is a Network World affiliate.