A day after Verizon executives said the enterprise market was picking up and cloud computing was a key cog in its growth strategy, the telecom giant acquired Terremark, which provides cloud services and data center hosting, for $1.4 billion.
The price tag for Terremark works out to be $19 a share in cash. Terremark closed at $14.05 on Thursday. In many respects, the Verizon move makes a lot of sense. Terremark is a much less expensive takeout target than Savvis or Rackspace would be for Verizon. Meanwhile, Verizon can use its army of sales people---remember MCI is part of the company---to sell cloud services.
Verizon said it will make a tender offer for all Terremark shares between Feb. 10 and Feb. 17. Verizon has already sealed agreements with three Terremark shareholders owning 27.6 percent of the outstanding voting shares.
With the move, Verizon said it will accelerate its "everything-as-a-service cloud strategy" and bolster its cloud portfolio. As a bonus, Verizon will get access to Terremark's government customer base.
Verizon said it will keep the Terremark brand and management team including CEO Manuel Medina. Terremark is based in Miami and has 13 data centers in the U.S., Europe and Latin America.
On Wednesday, Verizon operating chief Lowell McAdam and CFO Fran Shammo spent a good bit talking about cloud computing. Here's a portion of what he had to say.
You are going to see us move into the cloud space in a very big way in 2011. And we'll talk more about, as the quarters go on, what you can expect us to do -- more growth in the cloud arena.
McAdam was upbeat about cloud computing and where Verizon's network fits in:
We can improve our ability to compete and grow in the markets that we choose to serve. So this superior asset base gives us really a solid foothold in the growth markets of the future for broadband, for wireless data, for video and for cloud services.
He added that the shift to the cloud by "both business and consumer opens up another growth area for companies like Verizon that have integrated assets across the broader ecosystem."