CSPs, Data centers

Nearly 110 Cloud Data Centers Poised to Be Sold, Acquired

Nearly 110 cloud and managed hosting data centers could be sold during the second half of 2016, if CenturyLink and Verizon Communications each have their way. Indeed, CenturyLink has nearly 60 data centers up for sale. And Verizon appears to have nearly 50 data centers up for sale.

During an earnings call yesterday, CenturyLink said its data center sale process could wind up in Q3 or perhaps Q4 2016. Meanwhile, Verizon made a similar statement about its own data center sale process on an earnings call a few weeks ago. Both companies have been careful to say that their respective strategic review processes could result in no asset sales.

In other words -- if the price isn't right neither company intends to sell off their data centers. But both companies apparently have attracted bidders for their respective cloud, managed hosting and colocation centers. Verizon apparently is seeking at least $2.5 billion for its data center businesses. It's unclear how much CenturyLink has been seeking.

CenturyLink and Verizon Data Centers: Potential Bidders, Buyers

The big question: Which companies potentially have enough cash and interest to buy all of those data centers? Plenty of folks mention Equinix, the cloud and network exchange specialist, as a potential bidder. Others point to foreign data center providers, some of which may want to establish new or deeper footprints in the U.S. market. Other potential suitors to track include Digital Realty, CoreSite and CyrusOne. And there's always a chance that private equity firms want to make a run at the data center market.

Among the companies that I don't think will have interest: IBM, which already has its hands full trying to standardize cloud customers on BlueMix technologies in its SoftLayer data centers; and Rackspace, which is focusing heavily on managed services for third-party public clouds.

Cloud, Colocation Data Centers: Too Much Supply?

Even as more workloads shift to the cloud, both CenturyLink and Verizon could facing valuation pressures as they attempt to sell off their respective data center businesses. During Q1 and Q2 2016, CenturyLink's data center business actually contracted. And having two major telcos trying to sell off data center assets in the market at the same time certainly can't be a good thing for valuations...

Still, both CenturyLink and Verizon appear to be holding bidding processes for their respective data centers -- a clear attempt to drive up the potential selling price for the assets...

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.