Verizon Dives into 2011 with Acquisition of Cloud Partner Terremark

Event Summary

January 27, 2011 – Verizon announced it plans to acquire data center services provider Terremark Worldwide Inc. for $1.4 billion. The acquisition fits into Verizon’s“everything-as-a-service” strategy, which aims to leverage the cloud services model to deliver a broad range of services. Following the close of the deal, which is expected to occur later in Q1, Verizon will operate Terremark as a wholly owned subsidiary and will retain Terremark’s brand name. The acquisition will add 13 new data centers in the U.S., Europe and Latin America to Verizon’s existing portfolio.

Quick Take

Analytical Summary

• Current Perspective: Positive on Verizon’s pending acquisition of Terremark because the deal will increase the company’s geographic presence and cloud capabilities, particularly in Latin America. Adding important assets including 13 new data centers and innovative IaaS and security technologies will advance Verizon’s IaaS, dedicated hosting and colocation services set significantly. At the same time, Terremark gains the backing of a financially stable company with a complementary data center services strategy which includes significant ongoing investments in the infrastructure to support the delivery of these services.

• Vendor Importance: High to Verizon, because the company is paying a premium for Terremark in an effort to increase its data center capacity, IaaS portfolio, and reach into critical growth markets like Brazil. The company will enhance its managed services suite, particularly in with respect to its cloud offers, to grow future revenues and better differentiate itself in the increasingly crowded data center/cloud services playing field.

• Market Impact: Moderate on the data center services space, and to cloud services in particular, because the acquisition will bolster Verizon’s entire hosting and colocation suite and increase its managed services revenues over time. However, Verizon will need to handle the integration smoothly, and will need to leverage Terremark’s resources effectively, while continuing to let the acquired provider's business operate independently. Verizon will also need to invest in enhancements to the Terremark infrastructure that may have been put on the backburner.

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