GE has acquired Lineage Power Holdings in a $520 million deal that will bring its energy conversion equipment to the telecom, data center and cloud computing markets.
Lineage Power faces stiff competition from the likes of Emerson's Network Power unit, but by bringing its scale to the game GE is hoping to sell the power infrastructure behind the cloud. GE Energy plans on using Lineage to get more accounts and tap into the power conversion markets.
According to Frost & Sullivan, Emerson has 26 percent of the energy system market, followed by Eltek at 24 percent and Delta at 16 percent. Lineage has 8 percent of the energy system market, which is fragmented ("other" has 26 percent market share).
Every new mobile device plugs into an infrastructure that requires an ever increasing amount of high-quality power. The growth in high-bandwidth mobile internet applications and cloud computing is accelerating that demand. A globally networked planet needs a lot of power to keep spinning. As the data-driven economy grows, the addition of Lineage Power’s business platform continues the expansion of GE Energy’s offerings from the electric grid to datacenters, cell towers, routers, servers and circuit board electronics.
Specifically, Lineage Power has a bevy of big name customers for its AC-DC converters and DC-DC converters. Customers include AT&T, Verizon, Cisco, Hewlett-Packard and Oracle. Lineage Power, which has 2,300 employees an annual revenue of $450 million, was most recently privately held by the Gores Group. The company had been owned by Tyco.
Morgan Stanley analyst Scott Davis said:
(Lineage) competes directly with Emerson's Network Power business in the power conversion market. We think this market can grow at a high single to low double digit rate, driven by mobile internet proliferation, cloud computing and energy efficiency demands. Key customers include telecom service providers, OEM manufacturers, and data storage providers. Some of Lineage’s products are highly engineered (e.g. AC-DC converters) while others are more commoditized (e.g. DC-DC converters).
GE has been doubling down on power infrastructure. It recently acquired Dresser, an energy infrastructure company, and Wellstream Holdings, which makes oil pipes.