In a bid to accelerate its cloud computing effort, Verizon will acquire hosting firm Terremark for $1.4 billion.
The deal builds on a relationship the two companies began in September, under which Verizon sold cloud services to small and medium-sized businesses out of Terremark’s data centers.
As companies hit their limit on IT spending and data center space gets squeezed, businesses of all sizes are turning to cloud computing services and renting infrastructure if and when they need it. This avoids the high up-front capital costs of hardware, along with ongoing maintenance and support costs.
Terremark was early to market with cloud services in 2008 and joined the VMware vCloud initiative in 2009. That year VMware took a 5% stake in Terremark, approximately $20 million of stock, to ensure that the company built out its cloud infrastructure on VMware technology. Verizon is also a member of the vCloud initiative and runs its cloud on VMware.
Verizon plans to operate the new unit as a wholly owned subsidiary, with the Terremark name retained and the company's management team continuing to run operations.
Thoughts on Verizon's purchase
IT pros said it makes sense for old-line telco and tech giants to buy their way into booming new markets, but the purchases do not guarantee success.
One veteran IT professional said Verizon’s move reminds him of what another telco giant did a few years back. “Grab them while they’re cheap and you have the cash to burn. Remember AT&T in the 1990s…” he said via email.
Headquartered in Miami, Terremark operates 13 data centers in the U.S., Europe and Latin America. The company's Enterprise Cloud service provides some of the world’s largest companies and U.S. government agencies with on-demand computing resources. Like all cloud providers, it's had it's share of outages, but Terremark made a name for itself in the secure cloud services market, a big deal when selling to traditional enterprise IT organizations.
Jo Maitland is the Senior Executive Editor for SearchCloudComputing.com. Senior News Director Barbara Darrow also contributed to this report.