PAETEC gets its paycheck from enterprise users of voice and data communication services. Operating through subsidiary PAETEC Communications, the company provides services for local, long-distance, and Internet-based (VoIP) voice; cloud and data center functions, and data access and transport for more than 54,000 businesses in about 90 of the largest metropolitan areas of the US. It also provides enterprise telecommunications management software under the PINNACLE brand, and it offers premises equipment installation, as well as network engineering consulting. Customers include US federal agencies such as the DISA, DoD, and the FAA. PAETEC was acquired by Windstream in 2011 for about $2.3 billion.
PAETEC has used acquisitions to expand its service portfolio and its geographic reach. In 2011 the company bought XETA Technologies in a deal valued at about $61 million. XETA has developed customized products and managed services for vertical industries that include education, health care, hospitality, and government. XETA became part of PAETEC's managed services portfolio, providing hosted and lifecycle management services, as PAETEC looks to move further into the booming cloud services market.
In 2010 PAETEC bought Richmond, Virginia-based business and residential telecommunications services provider Cavalier Telephone for $460 million in cash. PAETEC was particularly interested in Cavalier's nearly 17,000-mile fiber-optic network (one of the largest in the US, overseen by subsidiary Intellifiber Networks) as demand for broadband continues to grow. Cavalier serves customers in mid-Atlantic, Midwestern, and Southeastern states.
PAETEC made two other acquisitions in 2010, including Sacramento, California-based systems integrator Quagga Corporation. The purchase improved PAETEC's ability to design and service communications systems, particularly those using Avaya equipment, for West Coast clients.
It also paid $3 million for U.S. Energy Partners, which supplied electricity to about 3,500 clients in western New York. The purchase broadened PAETEC's energy distribution business, which now serves more than 5,000 customers, and which the company considered complementary to its telecom services. New parent Windstream, however, considers it to be non-core and plans to divest it.
Through all of these acquisitions, though, PAETEC has steadily grown. The company now provides communications services in all 48 contiguous states (including the District of Columbia) through some 36,700 route miles of fiber located in about 40 states. It also operates more than 165 switching facilities that provide voice and IP services and seven data centers.
In an earlier move to divest non-core products, PAETEC sold its niche voice services product Trader Voice, which generated less than $1 million in sales, to Speakerbus in 2009.