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1/28/2011
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Verizon To Buy Terremark For $1.4 Billion

With the acquisition of the supplier of secure and government-oriented cloud services, Verizon is repositioning itself as a broad technology supplier.

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Verizon, in a move that brings it to the front tier of cloud services providers, is acquiring Terremark Worldwide, a supplier of secure and government-oriented cloud infrastructure, for $1.4 billion.

Verizon will pay $19 a share for Terremark between Feb. 10 and 17, or a 35% premium over Terremark's recent closing price. Shares of Terremark moved up $4.90 quickly in early trading Friday to be exchanged at prices just below the $19 mark.

Terremark's board has approved the purchase and the deal is expected to close in the first quarter. The premium reflects the value Verizon places on cloud services as an avenue of growth into broader business services.

Terremark has quickly established itself as a supplier of extra-secure cloud services to government agencies that require them, with data centers in such locations as Culpepper, Va., where the first of five secure facilities has been built on a 30-acre site. Terremark also operates data centers in the Silicon Valley and 10 other locations.

Verizon was already an operator of data centers around the world and had recently announced its plans to expand the number with facilities dedicated to providing cloud services. Combining data center services with its global wired and wireless networks gives it an advantage in delivering business services, said Patrick Vanhoeven, manager of cloud services, speaking from Verizon headquarters in Beltsville, Md.

In an interview Jan. 18, he said, "Few have the ability to turn off Internet traffic (between a business customer and a cloud data center) and route sensitive data across a IP line," as Verizon can.

Verizon also worked closely with the Payment Card Industry (PCI) Council last summer to architect a secure transaction-executing system in the cloud that could be certified as PCI compliant on the cloud provider's side. The originator of the data would also have to show that his systems were PCI-compliant for the whole transaction to be considered PCI-compliant.

By Aug. 18, Verizon was the first certified executor of PCI transactions in a cloud setting. Amazon Web Services soon followed Dec. 7 with certification of EC2 systems.

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