BOSTON--(BUSINESS WIRE)--ATLANTIC-ACM, a leading telecommunications strategy research consultancy and benchmarking firm, today released the following analysis of the proposed Verizon acquisition of Terremark:
Analysis by Aaron Blazar (firstname.lastname@example.org), Vice President, ATLANTIC-ACM
Verizon today announced plans to acquire data center and IT services provider Terremark for $1.4 billion, representing this year's first step in a trend that research consultancy ATLANTIC-ACM believes will accelerate throughout 2011 as IT services, telecommunications, cloud computing and data center models converge.
The announcement brings additional power to Verizon’s growing presence in the IT services business while strengthening its federal government business and, most importantly, adding a data center presence in rapidly growing South American markets.
Deal fits squarely within red-hot cloud computing space. Over
the last three years, the hot topic in the telecom and tech
space has been cloud computing. Verizon’s acquisition of Terremark
effectively strengthens its presence and its ability to offer services
in the cloud, and to support providers of cloud services. We
note that Verizon currently has a strong presence in the IT services
space via its security offering, which it acquired with the
acquisition of Cybertrust, and security services represent a growing
portion of its wireline strategic services business (in the fourth
quarter of last year, Verizon reported that its security business grew
12.3% year over year). The acquisition of Terremark will further
strengthen Verizon’s managed services offering as, currently,
Terremark generates nearly half its revenue from Managed and
Professional Services (aka Cloud Services or Managed Infrastructure).
Deal fits squarely within Verizon's strategic position inside
the federal government segment of the telecom space. Terremark’s
recent build of its NAP of Capitol Region data center facility in
Culpepper, Virginia, will deliver added value to Verizon's strong
federal government business. The facility, when fully
built, will be 250k square feet of data center space located outside
the “blast zone,” thus making it a go-to facility for government
systems integrators and the U.S. federal government. According
to Terremark, U.S. federal government departments represented about 21
percent of its revenue in the most recent quarter. Rolling
Terremark's portfolio over its own will allow Verizon to effectively
grow its position with the federal government and its vendors.
- Deal significantly enhances Verizon's global reach. Terremark's global portfolio of data center offerings will position Verizon in an even stronger position to compete for global telecom and IT services revenues. Terremark has presence in Europe, Asia, North America and South America -- a global data center presence that will strengthen Verizon’s global presence by delivering added scope in both product and reach. Notably, Terremark’s assets in Latin America, while currently representing six percent of its most recent quarter’s revenues, represent strong opportunity for expansion into high-growth emerging markets in addition to those markets which already are (relatively) well established.
The Bottom Line:
The proposed acquisition of Terremark by Verizon will leave Verizon with several immediate sources of growth that play well into its current business, while also opening doors to new growth opportunities in the cloud-based infrastructure space. If Verizon is able to execute and integrate in the fashion it did with the Cybertrust acquisition in the earlier portion of last decade, look for it to emerge as a strong competitor in the global infrastructure-as-a-service space. Look for this move to spark similar deals as competitors step up their games and vie for market position.
Boston-based ATLANTIC-ACM is a leading provider of strategic research and consulting services serving the telecommunications and information industries. In addition to producing the industry's principal benchmarking, sizing and opportunity studies, the company assists clients in evaluating telecommunications opportunities for successful investment, market entry, and long-term planning. For more information, visit ATLANTIC-ACM's website at www.atlantic-acm.com.