Verizon Gets Out Of Data Center Business, Sells Latin, North American Assets To Equinix For $3.6B

Telecom giant Verizon made it official Tuesday, saying it will sell its cloud hosting and data center business to global data center operator Equinix for a cool $3.6 billion.

The move comes after speculation began last year around the fate of Verizon's data center business. By selling its data centers to Equinix, Verizon can focus on its core connectivity and wireless business and Equinix will boost its presence in the U.S. and Latin America, the two companies said Tuesday morning.

The $3.6 billion cash deal gives Equinix 29 data center buildings across 24 data center sites. Equinix will expand into 15 metro markets in North America and Latin America, including in Atlanta, Denver, Miami, New York, Sao Paulo, and the Seattle area. This brings Equinix's data center footprint to 175 buildings in 43 global markets.

[Related: Report: Verizon 'Starting Process' To Sell Off Data Center Business For $2.5 Billion]

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Via the terms of the deal, 250 Verizon data center operations employees will become Equinix employees. Redwood City, Calif.-based Equinix will gain about 900 new customers, the companies said.

In January, reports had surfaced that said Basking Ridge, N.J.-based Verizon was getting ready to auction off its data center assets in a deal worth north of $2.5 billion. During Verizon's third-quarter earnings call in October, CFO Fran Shammo confirmed that Verizon was expected to sell its cloud hosting and data center business early in the fourth quarter.

Verizon entered the co-location and hosting space in 2011 when it purchased data center operator Terremark for $1.4 billion.

Data center operations have proven to be a challenge for many of the incumbent carriers. While many carriers began scooping up data center assets in earnest to get into the cloud market, these investments in physical assets largely haven't paid off. As a result, many have opted to return to their roots in the connectivity and voice markets, deciding that cloud services can still be offered without owning their own data center assets.

In November, Monroe, La.-based CenturyLink unveiled plans to sell off its data centers and co-location business for $2.15 billion to a group of funds advised by investment firm BC Partners. Little Rock, Ark.-based provider Windstream also sold off its data center operations to co-location provider TierPoint for $575 million in 2015.

Verizon said that its managed hosting and cloud offerings and its data center services delivered from 27 sites in Europe, Asia-Pacific and Canada won't be affected by this deal.

The two companies expect the transaction to close by mid-2017.