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Digital Realty + Telx: The Value for Data Center Users
The deal reinforces how top data center providers are realigning/expanding their services to meet the connectivity needs of tenants...

By David Liggitt · 7/15/2015

For months, there has been anticipation in the industry that Digital Realty would make a strategic acquisition. Consolidation in the data center market is not a new trend, and Digital Realty acquiring Telx for $1.8B was a move to reinforce their position as a leading data center provider. The Telx deal also illustrates how top data center operators are realigning/expanding their services to meet the connectivity needs of tenants.

In the last eighteen months, the following mergers and acquisitions have occurred in the data center industry :

  • Equinix acquired Telecity for $3.6 billion in May 2015
  • CyrusOne bought Cervalis for $400 million in April 2015
  • QTS agreed to buy Carpathia in May 2015 for $326 million
  • Data Bank acquired Arsalon in May 2014 for an undisclosed sum

The Digital Realty/Telx acquisition provides three benefits to data center users:

  1. Interconnectivity Options – One of the key differentiators of Telx was their extensive interconnection network. Interconnections in data centers enable low-latency exchanges of information between multiple telcos, content providers, and enterprises. By leveraging Telx's interconnections, Digital Realty's customers will experience a diverse interconnectivity platform.
  2. Cloud Access – Telx deepens Digital Realty's ability to deliver cloud-based services to customers. By partnering with multiple cloud service providers who leverage Telx's direct connections to Amazon and Google, Telx created a marketplace for enterprises to choose from various public, private, and hybrid cloud solutions.
  3. Smaller Deployment Focus – Digital Realty made an art of the "wholesale" data center model years ago and typically provides larger power and space deployments for users who manage their own equipment. Telx has served colocation users with historically smaller deployments and greater outsourcing needs. By purchasing Telx, Digital Realty has elevated their ability to meet the needs of smaller customers.

Bill Stein, CEO of Digital Realty, confirmed that Telx's strengths in interconnection, colocation, and cloud interoperability "perfectly complement" Digital Realty's business model. Although Stein says Telx will operate for now as a separate entity, the two will integrate in the future to better meet enterprise business needs up the IT stack.

Stein's comment of Telx being complementary to Digital Realty is key. By acquiring Telx, Digital Realty has both expanded and expedited the growing business-critical needs of interconnectivity and cloud access for their customers now and into the future.

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