Hybrid cloud demand drove Equinix's $3.6B deal for Verizon data centers

From Equinix's vantage point, the opportunity to buy 29 Verizon data centers for $3.6 billion makes perfect sense and was an opportunity to address a growing customer need for interconnectivity.

The hybrid cloud environment is growing and so are the complexities of managing an enterprise where customers have their own in-house data centers and use outside centers as well as a variety of cloud hosted capabilities, said Jonathan Lin, Equinix’s vice president of corporate development and strategy.

Equinix has focused on optimizing the interconnectivity needed between those different parts.

Customers may be using their own data centers, Equinix data centers and Amazon Web Services along with web-hosted applications such as Salesforce and Oracle.

Interconnectivity is crucial to making all of those parts work well together and get more computing power into the hands of users, Lin said.

Verizon acquired the heart of its data center business in 2012 through the $1.3 billion purchase of Terremark. The sale to Equinix is part of a shift in Verizon’s strategy as it focuses more on mobile and video -- see the pending $4.5 billion acquisition of Yahoo and launch of the go90 video streaming service.

The sale of the data centers frees up cash for Verizon to pursue other opportunities.

But don’t think Verizon is turning away from its customers. As part of the sale to Equinix, the two companies signed an exclusive reseller agreement that covers Verizon’s government customers.

In the government market, Equinix is getting data centers in Culpeper, Va. and Miami that have the security and processes in place for the government market. They currently handle a wide variety of agencies and departments.

The special government security requirements are “now part of our core competencies,” Lin said.

Those skills around security – both cyber and physical – only become more important as the demand grows for hybrid cloud solutions, Lin said.

“The hybrid environment really is the future,” he said.

The acquisition of the Verizon data centers accelerates Equinix’s push into new customers sets and geographies – Bogata, Columbia, Culpeper, and Silicon Valley.

Equinix is picking up 600 new customers that include those in government.

The density of what Lin calls the company’s “interconnectivity” also has increased. The advantage of this is that it increases customer flexibility and reliability, he said.

With the added space of the Verizon data centers, Lin said there are many customers looking to expand. “Customers have been asking us for more space and more power,” he said.

Equinix also plans to upgrade aging infrastructure by replacing older equipment.

Lin said he expects the Equinix federal sales team to be busy.

The company also is still looking at acquisitions, Lin said. There are still metro areas in the U.S. where it would like to expand as well as larger geographies such as South Africa, South Korea and China.

“We’re not done yet,” he said.