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Dimension Data Parent Company NTT Fuels U.S. Cloud Offensive With Two Acquisitions

NTT Communications Corp. and its subsidiary Dimension Data will more than double their U.S. data center capacity through two acquisitions announced Tuesday.

NTT Communications Corp., the Tokyo-based parent company of SP500 powerhouse Dimension Data, said Tuesday it will spend roughly $875 million to acquire two U.S.-based cloud and data center service providers, in a move that will more than double NTT's data center space in the U.S. and significantly expand its network services coverage around the globe.

NTT, in the first of the two deals, confirmed it will pay $525 million for Virtela Technology Services, a global managed and cloud network services provider based in Denver.

Meanwhile, NTT announced plans to acquire an 80 percent stake of RagingWire, a Sacramento, Calif.-based provider of data center services, for $350 million.

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Both acquisitions will allow NTT -- a $133 billion telecom giant ranked by Fortune as the 29th largest company in the world -- to significantly up its game against major U.S. cloud service providers, according to Marty Wolf, founder and president of martinwolf M&A Advisors, who worked with NTT on the deals.

"I think it's a big deal, and it's meaningful," Wolf told CRN. "If you are an HP or an IBM, this means you are finding more and more competition in your backyard."

Kazuhiro Gomi, CEO of NTT Americas division, also anticipates NTT's acquisitions to shake up the competitive landscape within the U.S. cloud services market.

"With these assets, we certainly will have much more scale and data center space. And we should be able to get the right kind of price points to the customers," Gomi said. "This will mean more resilient, enterprise-grade cloud services that we can offer to the market."

Gomi said NTT is aiming to grow its global cloud services revenue to 200 billion yen -- or roughly $2 billion -- by March 2016, with the U.S. representing the "largest piece" of that pie.

With the $525 million Virtela buy, NTT said it will marry Virtela's advanced service and operational platform with NTT's own global ICT infrastructure to roll out an end-to-end cloud compute, storage and network services offering on a global scale.

NTT said it expects the acquisition to expand its global network services coverage from 160 countries and regions to more than 190.

NTT also will upgrade its cloud-based network services with Virtela’s network function virtualization (NFV) technology to virtualize the functions of customers’ network equipment, such as firewalls and WAN accelerators.

Meanwhile, NTT's new ownership stake in data center services provider RagingWire will help create the backbone for NTT's expanding global footprint, particularly in the U.S. NTT said the deal will more than double NTT's data center space in the U.S., enabling it to cash in on what it called "high demand for data center services" in North America.

NEXT: NTT To Double U.S. Data Center Capacity


NTT currently operates eight data centers in the U.S. With an ownership stake in RagingWire, however, NTT has access to RagingWire's 650,000 square feet of data center space in its Sacramento, Calif., and Ashburn, Va., campuses, both of which are currently being expanded.

In addition, RagingWire is constructing a new 150,000-square-foot data center in Sacramento and has plans to build a brand-new 1,500,000-square-foot facility in Ashburn.

NTT said RagingWire's founders and management team will continue to operate the company under the RagingWire brand and maintain a minority interest in the company.

Gomi told CRN he expects the RagingWire and Virtela acquisitions to bear just as much fruit for NTT's subsidiary Dimension Data as it does for NTT itself.

"Dimension Data has its own public cloud platform," Gomi told CRN. "They are using NTT America's facility for their data center today. Now, with RagingWire facilities becoming available to them, it means more space for expansion."

South African-headquartered Dimension Data has been staging its own cloud and IT services offensive over the past few years, evidenced most recently by its acquisition of Australian managed security services provider Earthwave Corp., and its public goal of doubling its sales to $12 billion over the next five years.

Martinwolf M&A Advisors' Wolf said NTT's acquisitions also speak volumes to the changing of the solution provider and IT landscapes, and the urgency for traditional resellers to migrate to the cloud services world.

"It shows the continuation of the [cloud services] trend," Wolf said. "It's no longer about point solutions, but about the total solution."

PUBLISHED OCT. 29, 2013

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