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Verizon ‘Proceeding’ With Data Center Sale; Cloud Revenues Fall

Francis Shammo

Francis Shammo

After a slight delay, Verizon (VZ) is still on track to sell its cloud data center business and expects to update investors in early Q4, company executives said today. In the meantime, the telecom company’s cloud revenues continue to fall, according to estimates from Technology Business Research.

Verizon has been trying to sell its data centers since 2015. The company didn’t mention the pending sale on today’s earnings call until an analyst raised the issue. In response, CFO Francis J. Shammo said:

“On data centers we are proceeding with the sale of our data centers. We are currently in negotiations and we should have something to formally announce to everyone here early in the fourth quarter. So more to come on that, but we are progressing with the sale of our data centers.”

Wall Street expected the data center sale process to be wrapped up by now. Back in July 2016 Shammo had told analysts:

“On the data center sales we are coming to an end of the process. And we will probably come to a definitive answer in the third quarter [i.e., October] as to whether we’re going to move forward or we’re not. And so I’ll hold comment for the third quarter for that.”

Some reports suggest Equinix is the leading bidder for Verizon’s data centers.

Telcos Rethink Cloud Computing

Verizon once hoped to compete head-on against Amazon Web Services and Microsoft Azure. But highly regulated telcos couldn’t keep pace with cloud innovators, and many telcos are now rethinking their cloud strategies. CenturyLink also is trying to sell its data centers. Both Verizon and CenturyLink are rallying around network functions virtualization (NFV) and other network services to drive growth.

Still, the efforts remain a work in progress. According to Technology Business Research:

“Verizon reported a 6.7% year-to-year decline in overall revenue for 3Q16 following the divestiture of parts of its wireline business. While Verizon is, at the corporate level, a business in a state of transition, this is particularly true of Verizon’s cloud business. With the end of Verizon’s public cloud compute services in April, the company has entered a period of considerable change. TBR estimates that Verizon’s cloud revenue declined roughly 10% from 3Q15 as the company determines the most effective way to use its networking and security strengths to better position itself in an ever-crowding cloud market.”

Nobody said competing against cable, cloud and media companies was going to be easy…

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