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Verizon Relies On Cloud Services For Future Growth

Verizon's cloud investment had a major impact on its fourth quarter revenue and is expected to fuel growth into 2012 on the heels of the Terremark and CloudSwitch acquisitions.

Verizon's record fourth quarter revenue was due, in part, it its full-on emersion in the cloud market, an area Verizon plans to hammer as it integrates a pair of high-profile cloud acquisitions and further sharpens its cloud talons.

In Verizon's fourth quarter earnings call, Francis Shammo, the communication giant's executive vice president and chief financial officer, said Verizon's cloud investments, which included the $1.4 billion acquisition of cloud provider Terremark and Verizon's subsequent purchase of cloud application player CloudSwitch, are prepping Verizon for massive future growth.

Verizon has said that in 2011 it investment more than $2 billion in cloud services. Verizon is leading the telecom charge to the cloud, which has also seen other major carriers and service providers plunk down mountainous sums of cash to built out a cloud ecosystem.

[Related: Terremark Taps New President To Lead Verizon Cloud Charge ]

"In 2011, we also made some smart investments for the future growth and improved profitability. While very disciplined in our approach to capital spending, we continue to invest in networks and new technologies, which will be the platform for accelerated growth," Shammo said during the earnings call, according to a transcript from Seeking Alpha. "On the strategic front, we made some moves that will significantly improve our competitive position. These include the acquisitions of Terremark and CloudSwitch in the cloud computing space, several agreements to purchase additional spectrum, joint efforts around innovation with a number of partners including the cable companies and, of course, our continued leadership in the rapid development of the 4G LTE ecosystem."

Further fueling Verizon into 2012, Shammo said, is its recently formed Global Enterprise solutions organization which will integrate offerings across various lines of business, including wireless, Strategic Services, FiOS, the cloud and more.

It was Strategic Services, Shammo said, that drove big year-over-year improvement in Global enterprise Revenue. In the fourth quarter, he said, services like cloud computing, IP communications, call center and managed network totaled $2 billion in revenue, up 14.7 percent year-over-year, and representing more than half of the Global Enterprise revenue. And Terremark's growth, specifically, was "outstanding," Shammo said, with revenues up about 10 percent sequentially in the fourth quarter and roughly 18 percent year-over-year.

"And in the enterprise space, we are clearly gaining traction as the leading global provider in the information technology solution space," Shammo said. "The integration of Terremark and the addition of CloudSwitch have significantly improved our competitive position, giving us a unique set of capabilities to combine solutions around the network, data center, security and cloud infrastructure."

Verizon expects the Terremark and CloudSwitch acquisitions to further grow its bottom line.

"…[We] believe that with the acquisitions of Terremark and CloudSwitch, we continue to grow that top line. As I said, Terremark had an outstanding quarter, sequentially up 10 percent. That came out of a September all-time high booking. That will continue into [2012] because, obviously, those bookings don't book all in the same quarter that you sell. In this business, it takes six to 12 months to record that revenue. So I think we're continuing to expand on our cloud services bases, which also helps top line revenue for Wireline," Shammo said.

The cloud push will also be integral into bringing Verizon into more international markets. Prior to buying Terremark, Verizon had little presence in Latin America, and Verizon's cloud momentum will be key in its attack on new geographies.

"So I think, one, absolutely around the cloud, but also the convergence of cloud and what that brings to -- from an overall enterprise mobility standpoint and the integration of that cloud and that mobility solution when you look at machine-to-machine and cloud and what that can bring to an enterprise customer in a vertical solution set," Shammo said. "…[Y]ou're going to see more and more around cloud …. And as we expand internationally, I think you'll see more international growth out of us, especially around the cloud services."

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