Why Comcast Wants Masergy

Comcast (Nasdaq: CMCSA) is set to buy Masergy, a provider of software-defined wide-area networking (SD-WAN) managed services, in a bid to strengthen Comcast Business’s enterprise service offerings. Timing and terms of the deal were not disclosed.

The arrangement showcases the shift service providers are making toward SD-WAN as a way to accommodate demand for secure alternatives to VPNs – demand that’s growing as the pandemic-based “work from anywhere” trend continues. It spotlights the move some large international service providers are making toward business services. And it continues a shift toward consolidation in SD-WAN, as small pioneering firms are gobbled by larger players.

“Masergy provides a perfect complement to our portfolio of enterprise services and solutions and will allow us to instantly and dramatically amplify our growth in the global enterprise market,” said Bill Stemper, president of Comcast Business, in a press release. He said Masergy employees and management will join Comcast Business.

Masergy Moves On Up

Plano, Texas-based Masergy was founded in 2000 by tech exec Barry Nalls as a communications network services provider to businesses of all sizes. Besides SD-WAN managed services, it offers unified communications as-a-service (UCaaS), call center as-a-service (CCaaS), multi-cloud connectivity and secure access service edge (SASE) solutions. Its services are based on its own software and technologies from a range of partners, including Cisco (Nasdaq: CSCO), Fortinet (Nasdaq: FTNT), and Silver Peak (now part of Hewlett Packard Enterprise – NYSE: HPE), to name a few. Masergy also has focused on adding zero trust network access (ZTNA) capabilities to its network via a relationship with Bitglass.

By 2016, Masergy had grown nicely, boasting double-digit growth into the hundreds of millions annually. But it couldn’t quite make the next move up. Masergy backed out of a potential IPO. A planned takeover by another company was derailed during the final stretch. Finally, Masergy was sold in 2016 to equity investment firm Berkshire Partners LLC of Boston for a rumored $900 million, though the amount was never publicly revealed.

Masergy claims 1,400 customers, including Ashley Homestore, Amgen, Ancestry, Teknion, The Hallmark Channel, and Entegris, to name a few. It operates in over 100 countries and has about 700 employees. Its CEO Chris MacFarland (ex-BroadSoft, Allegiance Telecom, Verio, CompuNet, among others) is also chairman of the board.

Comcast Looks to Expand

The Masergy deal is the latest in a series of moves that boost Comcast’s presence in enterprise business services. This past June, for instance, Comcast inked a deal with Versa Networks to add SASE capabilities to the Comcast ActiveCore software-defined networking (SDN) platform. SASE is a red-hot area, and Comcast can claim to be among the first cable companies to offer a solution.

Versa also supplied gear for Masergy’s first foray into SD-WAN services in 2017 and its introduction of a virtual managed router in 2019. And in April 2021, Comcast picked Versa to enhance ActiveCore with artificial intelligence (AI) to optimize SD-WAN traffic.

In February 2021 Comcast also sought to boost its Teleworker VPN solution for remote workers via integration with Cisco Meraki. Other business partners include Akamai (Nasdaq: AKAM) and Fortinet, as well as Palo Alto Networks (NYSE: PANW), whose Prisma Access was adopted by Comcast in March 2021.

All of these alliances helped Comcast beef up its enterprise business services. And the addition of Masergy, which brings its own network to the table, could add to a winning mix.

Meanwhile, as Futuriom has noted, the list of SD-WAN players available for acquisition keeps dwindling. Aryaka, Cato Networks, and Versa are also potential candidates for IPO or M&A as carriers seek partners to boost SD-WAN and SASE ecosystems.

Managed Services in Demand

The Masergy deal bodes well for Comcast Business, which seems to have made SD-WAN a priority launching pad for SASE and other cloud-based services. And that could be a good bet: In Futuriom’s 2021 SD-WAN Managed Services Survey, 82.5% of the enterprise end users polled (99 respondents) said their awareness of SD-WAN managed service offerings is growing. A full 90.8% plan to grow SD-WAN technology as part of a strategy to replace alternatives such as leased lines.

Of course, Comcast's competitors, including AT&T (NYSE: T), Verizon (NYSE: VZ), and T-Mobile (Nasdaq: TMUS) also have an eye on the SD-WAN and SASE markets as enterprises seek greater scale and security.

Now Comcast has another arrow to aim at these and other firms that are moving aggressively into the enterprise battlefield.