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Verizon charts a different cloud services path

Andy Patrizio | Feb. 26, 2016
The telecom giant is unloading its data centers to focus on its services business.

When running down the list of top cloud vendors, the name Verizon doesn't come up immediately, but the firm is looking to expand its particular brand of cloud services that complement main players like Amazon and Microsoft. It's also fending off rumors it's getting out of the cloud business. 

Late last year, the company denied reports it was looking to sell off its enterprise services business, which include cloud services and data centers. At the Wells Fargo Securities 2015 Technology, Media & Telecom Conference in late November, Verizon CFO Francis Shammo denied reports that his company is considering selling some of its enterprise assets after a Reuters report said just that. 

At that time, Verizon had been on a bit of a selling spree, unloading its residential landline assets for $10.54 billion to Frontier Communications in February 2015 and its cell tower portfolio for more than $5 billion. 

And it turns out Verizon was in a selling mood, but not of the cloud services. This month, Verizon said it would shut down its public cloud service, which competed with Amazon Web Services and Microsoft Azure. Or tried to. Customers were told they had one month to move their data or lose it forever. 

A few weeks back on the company's quarterly earnings call, Shammo confirmed that the company was considering selling its data centers but not the services. Verizon picked up a bunch of data centers when it bought Terremark in 2011, which was its entrance into the cloud business, and now it's considering doing with its data centers what it did with its cell towers: leasing rather than owning. 

All told, Verizon owns 48 data centers. "We will always look for opportunities," Shammo told analysts on the call. "The data center is an exploratory exercise to see if the asset is more valuable inside or outside the portfolio." 

Chris Antoitz, senior analyst for telecom at Technology Business Research, said a lot of telcos are looking to get out of the data center business because margins have come way down thanks to the "AWS effect," as he put it. Amazon has made it too difficult to keep up with running a data center profitably. 

"What they are trying to do is get out of owning and operating data centers and [would rather] work with partners and be an interconnect partner to facilitate cloud implementations for enterprises. So it's a different play from what they wanted to do," he said. 

The ‘Big 3’ are a tough act to follow 

Verizon isn't alone. Its arch-rival AT&T sold off its managed application and managed hosting services to IBM in mid-December and is also reportedly looking to unload its data centers. 

 

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