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Why IBM Is the Best Fit for Verizon's Enterprise Cloud Business

Ray Le Maistre
2/15/2017
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IBM looks best placed to pick up Verizon's enterprise cloud services business, which the major US operator has decided is now surplus to requirements.

Light Reading reported earlier this month that Verizon has agreed to a deal to sell that business, and there are a number of reasons why it would make sense for IBM to be the buyer. (See Verizon on Verge of Enterprise Cloud Sale – Source.)

The acquisition of Verizon's enterprise cloud services business would make sense for IBM Corp. (NYSE: IBM) for a number of reasons: Cloud is one of the IT giant's earnings bright spots and it has a strategic imperative to grow that business -- revenues from its cloud services and related activities totaled $13.7 billion for the full year 2016, up an impressive 35%. Further scale could only help as IBM seeks to gain market share and edge closer to market leader Amazon Web Services Inc. (AWS). (See AWS Maintains Its Public Cloud Dominance and IBM: AI Needs More Than Just Technology.)

IBM previously splashed out about $2 billion in 2013 to acquire SoftLayer for its cloud infrastructure business, and today the company highlights growth in cloud services as a counterpoint to financial declines in its more traditional business units. (See AT&T Tightens NetBond to IBM SoftLayer and The Myth That Telcos Can't Do Cloud.)

In addition (and here's the "people" angle, folks!), the team at IBM will have a very good understanding of what they'd be getting: The former CTO of Verizon's cloud business, John Considine, now heads up IBM's Cloud Infrastructure Services business, and the former CTO of Verizon's cloud platform engineering group, Kevin Clarke, is now IBM's Director Cloud Innovation Lab. Considine left Verizon in September 2014 and reemerged at IBM in September 2015. Clarke left Verizon in March of 2015 and turned up at IBM a year later. (See Verizon: Cloud Security Is Often an Excuse to Avoid Change.)

So there's a good fit and business justification for such a move and while there is nothing solid linking IBM to such a deal currently, the smart money is on Big Blue.

IBM did not respond to requests for comment on this matter, while Verizon Communications Inc. (NYSE: VZ) previously declined to comment on any impending sale.

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading


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