Verizon Ripping Cloud Valuations To Pieces

our fictitious stock portfolio of cloud computing companies

Terremark, based in Miami, is to cloud hosting companies as Cliff Lee was to professional baseball free agents last year: the best available on the market in terms of raw statistics and promise.

So what’s the problem?

Terremark has been hemorrhaging money –- posting losses of $42.2 million in 2008, $10.6 million in 2009 and $31.7 million for its 2010 fiscal year. In Terremark’s quarter that ended Sept. 30, it posted a $7.98 million loss. That was a steeper loss than even the year-earlier quarter, when it lost $7.47 million.

On top of all that red ink, Terremark is carrying more than $450 million in debt.

Verizon does get a best-of-breed hosting business, which provides state-of-the-art hosting infrastructure across the globe, expertise in providing solutions for the world’s largest enterprises (including Verizon rival AT&T, so let’s sit back and watch how that shakes out), and technology that’s complimentary to what Verizon already has in its lineup.

So what happens to all of Terremark’s competitors?

Let’s look to Sungard, for one. That company is more than $8 billion in debt and its Sungard Availablity Services unit -– the heart of Sungard’s cloud business -– has been losing enterprise customers that have found it’s actually cheaper to host their own technology on-premise rather than re-signing with Sungard. That’s according to Sungard’s own filings with the U.S. Securities and Exchange Commission.

Sungard actually said several months ago that it was putting its Availability Services in play, considering a spin off or some other business transaction. Now armed with the valuation Verizon has pinned on Terremark, Sungard could actually turn its Availability Services entity into a nice pay day.

But while Verizon has the wherewithal to absorb Terremark’s debt and bury its operating losses into a larger balance sheet, it remains to be seen if potential suitors for other cloud hosting companies will have similar capabilities.

Valuations of cloud computing companies –- particularly the hosting companies, with multi-billion dollar infrastructures that need regular upgrades and expansions, and carrying tons of debt –- could be thrown way off-kilter in the coming months. While cloud computing itself is viewed as disruptive to the IT industry in a positive manner, cloud valuations could be disruptive in an entirely different way.