Verizon makes $1.4B cloud play with Terremark acquisition

Acquisition of cloud service provider moves forward Verizon's 'everything-as-a-service model.'

Verizon Communications Inc. is acquiring Terremark for $1.4 billion in a move to bolster its cloud computing offerings.

While not specific to the government market, Verizon’s move comes as the Office of Management and Budget is pushing a “cloud-first” initiative, requiring agencies to consider cloud computing solutions before buying more infrastructure.

Once the deal closes, Terremark will become a wholly owned subsidiary of Verizon and continue to operate under its original name.

Verizon is offering $19 a share which is 35 percent higher than Terremark’s closing price on Jan. 27. Verizon has reached agreements with three shareholders who control 27.6 percent of Terremark’s stock to tender their shares.

The acquisition is expected to close by March 31.

The deal feeds Verizon’s “everything-as-a-service” cloud strategy by adding secure, scalable, on-demand solutions for business and government customers, Verizon said in a statement.

“Cloud computing continues to fundamentally alter the way enterprises procure, deploy and manage IT resources, and this combination helps create a tipping point for everything as a service,” said Lowell McAdam, president and chief operating officer of Verizon, in the statement.

“This agreement represents an exciting opportunity to accelerate our strategy and serve our enterprise and government customers with even greater innovation on a global scale with Verizon’s resources and extensive reach,” said Manuel D. Medina, chairman and CEO of Terremark.

To serve the government market, Terremark has a facility in Culpepper, Va., that can accommodate up to five, 50,000-square-foot data centers. Each data center meets the standards for a sensitive, compartmented information facility or SCIF, according to Terremark’s website.

The company also holds a General Services Administration Schedule 70 contract. It has customers with civilian and defense agencies.

Verizon is a Top 100 contract, coming in at the No. 19 on the 2010 rankings of the largest government contractors.