Service Provider Cloud

IBM Scoops Up Cloud Assets From Verizon

It's official: Verizon is selling its cloud and managed hosting service to IBM. The telco also says it plans to work with IBM "on a number of strategic initiatives involving networking and cloud services."

The deal, expected to close later this year, brings 700 customers to IBM Cloud and expands the company's global footprint, IBM said in an email statement to Enterprise Cloud News. The company doesn't expect "immediate impact to clients as a result of this agreement," the statement says.

For Verizon's part, the agreement allows its Enterprise Services business to focus on providing connectivity for enterprises to cloud applications, according to a brief statement from Verizon.

Enterprise Cloud News' sister site, Light Reading, broke the story in February that Verizon Communications Inc. (NYSE: VZ) was selling its enterprise cloud assets, and ECN speculated later that IBM would be an ideal suitor. Rumors that Verizon was looking to sell first surfaced in 2015, a mere four years after Verizon bought cloud services company Terremark. (See Verizon on Verge of Enterprise Cloud Sale – Source.)

Enterprise cloud is a priority for IBM Corp. (NYSE: IBM). Revenues from IBM's cloud services and related activities -- which IBM calls "strategic imperatives" -- totaled $7.2 billion in the quarter ending March 31, up 12% year-over-year. Cloud revenue was $3.5 billion, up 33%. However, the company's legacy business is declining, dragging down revenues overall. (See Legacy Business Still Dragging IBM Down.)

IBM paid about $2 billion in 2013 to acquire SoftLayer for its cloud infrastructure business. (See Why IBM Is the Best Fit for Verizon's Enterprise Cloud Business.)

Inside an IBM data center. (Photo source: IBM)
Inside an IBM data center.
(Photo source: IBM)

IBM's cloud leadership includes some old Verizon/Terremark hands. John Considine, IBM general manager for cloud infrastructure, was formerly CTO of Verizon's cloud business, and the former CTO of Verizon's cloud platform engineering group, Kevin Clarke, is now director of IBM's cloud innovation lab.

Considine told Enterprise Cloud News in March that IBM plans to splash billions of dollars on infrastructure investments in the cloud. (See IBM's Big Hybrid Cloud Plan Calls for Big Infrastructure Investment.)

Considine spoke at a Open Networking User Group conference last week, discussing some of the pitfalls and obstacles for enterprise cloud migration. (See Seven-Plus Risks & Barriers to Cloud Migration.)

M&A activity is turning the cloud upside down. Find out what you need to know in our special report: Mergers, Acquisitions & IPOs are Rocking the Cloud.

While Verizon's enterprise cloud business withers, the telco has been transforming into a media company, buying AOL for $4.4 billion in 2015 and planning to close it $4.5 billion acquisition of Yahoo in several months. Verizon sold its data centers to Equinix late last year. (See Verizon Knocks $350M off the Price of Yahoo, Verizon Sports Big Plans for Yahoo, Verizon Closes AOL, Hints at Summer Launch and Finally! Equinix Pays $3.6B for Verizon Data Centers.)

Verizon is looking for future growth to content and applications that run on top of its network as well as 5G wireless technologies.

Along the lines of enterprise connectivity, Verizon bought XO Communications in February. (See Verizon Completes XO Fiber Buy; 5G Stage Set.)

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— Mitch Wagner Follow me on Twitter Visit my LinkedIn profile Visit my blog Friend me on Facebook Editor, Enterprise Cloud News

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Mitch Wagner 5/24/2017 | 10:46:39 AM
Re: meanwhile It's an ad deal. Contentis secondary. Content is a platform on which to suport ads. 
Joe Stanganelli 5/23/2017 | 11:03:01 PM
Re: meanwhile @Mitch: I'm still trying to wrap my head around the Yahoo deal. I think it's simply a matter of them wanting to get a few particular analytics, mobile, and other tech toys (Summ.ly comes to mind) and seeing a good deal overall on a potentially undervalued company (at least, undervalued in the right hands).

The content certainly helps, but I can't imagine that was the primary driver for the acquisition.  Or, well, I can...but really?
kq4ym 5/14/2017 | 5:57:01 PM
Re: Partnership Seems a good move for Verizon, as noted they're trying to be a media company and the cloud assets are probably best moved on to IBM. Noting that "Verizon was looking to sell first surfaced in 2015, a mere four years after Verizon bought cloud services company Terremark," one might wonder if they would reap a better price by waiting a bit longer as more cloud competitors try to buy up assets?
Mitch Wagner 5/4/2017 | 3:27:02 PM
Re: meanwhile There's a logic to it. Verizon is looking to provide network connectivity, but getting out of the business of actually running the data centers. 

Also, providing content via AOL and Yahoo. 

The connectivity move looks smart to me. The content move looks crazy. 
Joe Stanganelli 5/4/2017 | 3:21:18 PM
Re: Partnership I think IBM, with BlueMix, and especially with Watson, keenly understands the importance of the cloud to its future -- especially with the issues it has dealt with over the past few years.
Joe Stanganelli 5/4/2017 | 3:20:08 PM
meanwhile While these deals certainly make sense in the greater context of things, no doubt...on the surface, it's rather curious that VZ is selling off so much of its cloud assets to IBM and its datacenters to Equinix -- and at the same time having just come off of buying (of all things) most of Yahoo.


Looking forward to the master plans being unveiled...
Mitch Wagner 5/4/2017 | 9:57:12 AM
Re: Partnership We're seeing a trend of telcos selling off data center assets while continuing to offer cloud services as resellers -- often from the same assets they used to own. 
danielcawrey 5/3/2017 | 8:24:08 PM
Partnership This is a great partnership. 

It seems IBM is getting something from Verizon it did not want anymore, yet can still benefit from. I think we're going to see more deals like this in the future. 
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