Verizon Makes $1.4 Billion Cloud Play with Terremark BuyVerizon Makes $1.4 Billion Cloud Play with Terremark Buy
It's encouraging news that the carrier is willing to put real money into something other than just consumer services.
January 28, 2011
It's encouraging news that the carrier is willing to put real money into something other than just consumer services.
Everybody's talking about the cloud, but Verizon just put a big chunk of money where its mouth is, by announcing it will spend $1.4 billion to acquire Terremark, a company that provides hosted (i.e., cloud-based) IT infrastructure. Clearly, Verizon is taking its commitment to the cloud to the next level.
In making the announcement, Verizon stated:
This transaction will accelerate Verizon's "everything-as-a-service" cloud strategy by delivering a powerful portfolio of highly secure, scalable on-demand solutions to business and government customers globally through a unified enterprise IT platform and unique business cloud offerings that leverage the companies' collective strengths.
Verizon plans to operate the new unit as a wholly owned subsidiary retaining the Terremark name and with Terremark's current management team continuing to manage the company.
"Cloud computing continues to fundamentally alter the way enterprises procure, deploy and manage IT resources, and this combination helps create a tipping point for 'everything-as-a-service,'" said Lowell McAdam, president and chief operating officer of Verizon. "Our collective vision will foster innovation, enhance business processes and dynamically deliver business intelligence and collaboration services to anyone, anywhere and on any device."
Verizon plans to operate the new unit as a wholly owned subsidiary retaining the Terremark name and with Terremark's current management team continuing to manage the company.
"Cloud computing continues to fundamentally alter the way enterprises procure, deploy and manage IT resources, and this combination helps create a tipping point for 'everything-as-a-service,'" said Lowell McAdam, president and chief operating officer of Verizon. "Our collective vision will foster innovation, enhance business processes and dynamically deliver business intelligence and collaboration services to anyone, anywhere and on any device."
At a time when the big drivers in the carriers' business models have seemed to be the twin pillars of consumer services--wireless and ever-faster landline broadband--this kind of investment in an enterprise play is encouraging news. It suggests that at least one of the major U.S. carriers doesn't plan to lose its enterprise focus, and in fact intends to be a major player in one of the areas that's becoming critical to the enterprise--the cloud.
Equally important is the news that Verizon plans to keep Terremark as a wholly-owned subsidiary. As important as it is to see the carriers move into the new technologies and services that will be important to enterprises going forward, their ability to actually deliver these new services ought to be improved if they're not sidetracked by long, difficult organizational integration work. Presumably Verizon will look for ways that it can integrate some of its infrastructure with Terremark's, but the pressure won't be on, as it would be if the companies were being fully merged.
The deal that Verizon-Terremark most resembles is last year's $3.2 billion NTT acquisition of Dimension Data. That acquisition was in a different area--systems integration versus cloud infrastructure--but it was similar in that both represent big efforts by a legacy carrier to break into a business where they haven't been strong in the past, but need to beef up if they want to remain maximally relevant to enterprises.
