Verizon Heads Deeper Into the Cloud

Verizon (NYSE: VZ  ) is all about cloud computing today.

Big Red is sinking $1.4 billion of cash into cloud services by acquiring Terremark Worldwide (Nasdaq: TMRK  ) . It's not like Verizon had been ignoring cloud-based enterprise services before, but the company now suddenly becomes a powerhouse in that market.

Terremark provides hosting, data-center management, and cloud-computing services to large corporations, government arms, and other organizations with huge IT management needs. Tying its services and infrastructure into Verizon's Internet backbone network and enormous resources sounds like a win-win proposition.

It helps that Verizon has been a Terremark customer since last summer, reselling collocation services out of Terremark data centers. That business relationship may have sown the seeds to this buyout.

Does this mark the start of a buyout binge between carrier giants and cloud-service experts? I'm not so sure. Rackspace (NYSE: RAX  ) is valued a little too richly to make telecom mouths water, and Internap Network Services (Nasdaq: INAP  ) is too small to be much of a difference-maker.

SAVVIS (Nasdaq: SVVS  ) looks like great buyout bait on paper, just in case AT&T (NYSE: T  ) or Level 3 Communications (Nasdaq: LVLT  ) wanted to bolster their cloud-service offerings, and I wouldn't suffer a heart attack if I saw an announcement like that, but it's still a long shot.

So let's call this a one-shot deal and see where Verizon can take its new subsidiary. I think it's a fine-looking partnership that accelerates Verizon's ambition to become an "everything as a service" provider and gives Terremark shareholders an instant 35% return on their investment.

Add Verizon to your watchlist to see where Big Red goes next.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Rackspace Hosting is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. You can check out Anders' holdings and a concise bio if you like, and The Motley Fool is investors writing for investors.


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  • Report this Comment On January 28, 2011, at 11:26 PM, PeyDaFool wrote:

    Thanks, Anders, for not mentioning Apple in this article about Verizon. Maybe you're realizing you've been wrong about them all along and are just avoiding the topic of AAPL these days? I sincerely hope this is the case.

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