The dominos continue to fall: Time Warner Cable is acquiring NaviSite, for a total equity value of around $230 million. By contrast, Verizon bought Terremark at a valuation of $1.4 billion. Terremark had about $325m in 2010 revenues; NaviSite had about $120m. So given that the two companies do substantially similar things — NaviSite has largely shed its colocation business, but does managed hosting and cloud IaaS, as well as application hosting (which Terremark doesn’t do) — the deal values NaviSite much less richly, although it still represents a handsome premium to the price NaviSite was trading at.

The really fascinating aspect of this is that it’s not Time Warner Telecom that’s doing this. It’s Time Warner Cable. TWT would have made instant and obvious sense — TWT doesn’t have a significant hosting or cloud portfolio and it arguably needs one, as it competes directly with folks like AT&T and Verizon; most carriers of any scale and ambition are eventually going to be in this business. But TWC is, well, an MSO (multiple system operator, i.e., cable company). They do sell non-consumer network services, but mostly to the true SMB (and their press release says they’ll be targeting SMBs with NaviSite’s services). But NaviSite is more of a true mid-market play; they’ve shed more and more of their small business-oriented services over time, to the betterment of their product portfolio. NaviSite has services that best fit the mid-market and the enterprise, at this point.

NaviSite has been on a real upswing over the past year — Gartner Invest clients who have talked to me about investment opportunities in the space over the last year, know that I’ve pointed them out as a company worth taking a look at, thanks to the growing coherence of their strategy, and the quality of their cloud IaaS platform. This is a nice exit for shareholders, and I wish them well, but boy… bought by a cable company. That’s a fate much worse than being bought by a carrier. I can’t remember another major MSO having bought an enterprise-class hoster in the past, and that’s going to put TWC in interesting virgin territory. And there’s no mercy for NaviSite here — TWC has announced they’re getting folded in, not being run as a standalone subsidiary.

Lest it be said that I am negative on network service providers, I will point out that I have seen plenty of these acquisitions over the years. All too often, network service providers acquire hosters and then destroy them; the only one that I’ve seen that worked out really well was AT&T and USi, and that was largely because AT&T had the intelligence to place USi’s CEO in charge of their whole hosting business and let him reform it. Broadly, the NSPs usually do benefit from these acquisitions, but value is often destroyed in the process, primarily due to the cultural clashes and failure to really understand the business they’ve acquired and what made it successful.

I wonder why TWC didn’t buy someone like GoDaddy instead — rumor has long had it that GoDaddy’s been looking for a buyer. Their portfolio much more naturally suits the small business, and they’ve got a cloud IaaS offering about to launch publicly. It would seem like a much more natural match for the rest of TWC’s business. I suppose we’ll see how this plays out.

(I expect that we’ll be issuing a formal First Take with advice for clients once we have a chance to talk to NaviSite and TWC about the acquisition.)