Verizon Communications (VZ) stock rose 1.23% on Tuesday. The company announced that it will sell certain data center assets to Equinix (EQIX) in a deal worth $3.6 billion. Equinix purchased Telecity Group Plc. Earlier in the year as part of its expansion strategy.
Equinix will receive 24 data centers as part of the deal spread over 29 buildings in 15 metro areas.
The deal is expected to be completed in mid-2017 and is an all-cash offer.
Verizon Offloading Data Centre
Verizon’s offloading of the company’s data centre business is a strategic effort to focus on its advertising and mobile video sector. The company has agreed to purchase Yahoo! Inc. (YHOO) for $4.8 billion to expand its advertising properties.
The deal hit a snag when Yahoo! announced a massive data breach, which may result in Verizon lowering their offer for the tech company.
Mobile advertising is Verizon’s strategic focus. The company hopes to compete with Facebook (FB) and Google (GOOGL) in the mobile advertising space.
Equinix’s offer makes sense for the company, and Verizon’s assets will help the company expand its offerings in Latin America and the US. Miami’s data centre is a key focal point of the deal, and will help with interconnection when expanding to Latin America.
Enterprises are the primary users of Verizon’s data centres. The deal includes 900 customers across all data centres, and most these customers are enterprises.
Equinix’s strategy is to boost revenue through acquisition. Upgraded technology and enhanced features to attract customers is part of the company’s goals moving forward. Recurring revenue from the Verizon deal will allow the company to support its revenue model.
The company’s market position allows for a revenue growth rate of 10% through 2017 based off of its projections. Verizon’s assets will further position Equinix to capitalize on the demand for data centers. The addition of 900 customers will provide an immediate boost to the company’s revenue.
