Cloud computing was all the rage amongst the North American wireless operator fraternity last year as several carriers including Telus, Bell and Verizon signed breakthrough partnerships to make the most of the ongoing “everything-as-a-service” revolution.
That trend is largely expected to continue this year with Verizon setting an early example. The second-largest U.S. phone company recently announced its plan to acquire Terremark, a global provider of managed IT infrastructure and cloud services, for USD 19.00 per share in cash, or a total equity value of USD 1.4 billion.
Data centers are a costly proposition. Most carriers are faced with the eternal dilemma of “Build vs. Buy” and Verizon chose the latter to accelerate the time-to-market cycle. While Verizon hopped on to the platform as a service bandwagon as early as 2009, its in-house cloud computing capabilities are nothing to write about. With Terremark in the bag, things are expected to change for the better.
Terremark is a strong player in the infrastructure as a service (IaaS) segment. In contrast, Verizon has struggled to win any substantial competitive cloud-based bids; often losing to Terremark. With several new mega-data centers on the horizon, this move is expected to be a huge cost saver for Verizon. Moreover, Terremark seems to be a natural ally for Verizon as the latter looks to make in-roads into the enterprise segment.
The carrier says the move “will decisively reshape the rapidly evolving global business technology solutions market“. While that seems to be an overkill, there’s little doubt that this move would exert severe data center pricing pressure on its competitors including AT&T, T-Mobile and others. On the other hand, Terremark maintains that the deal will not affect any of its existing clientele that may be competitors with Verizon, and that it would continue to adopt a ‘neutral’ outlook for such customers.
While the move is expected to boost Verizon’s “everything-as-a-service” cloud strategy, Derrick Harris from the GigaOM team believes the deal isn’t necessarily a blessing in disguise for Terremark, which operates 13 data centres in the US, Europe and Latin America, and has an impressive clientele include US government agencies and a number of technology heavyweights. In contrast, Verizon’s footprint is much larger – 220 data centres in 23 countries. IMO, USD 1.4 billion isn’t a bad price to tap into Terremark’s impressive customer base.
The cash deal values Terremark at $19 a share, a 35 percent premium over the company’s closing share price. Once the deal is closed, Terremark will operate as a wholly-owned subsidiary of Verizon, under the management of the current team.