Verizon's enterprise growth will be driven by cloud, security, M2M, says McAdam

Verizon Communications' (NYSE: VZ) enterprise business continues to weather a challenging economic time, but according to CEO Lowell McAdam, cloud, machine to machine (M2M) and security represent large opportunities for the telco.

Lowell McAdam, Verizon


Speaking at the Morgan Stanley Technology, Media & Telecom Conference, McAdam said the service provider has taken a number of steps to improve its processes and systems to serve its business clients over the past two years.

He said that the economy is "beginning to show life, but I would say the overall business economy needs to improve a little bit."

Perhaps the biggest issue that Verizon and its large ILEC brother AT&T (NYSE: T) faces is how and when next-gen services will completely displace losses from legacy technologies like frame relay and ATM.

"The cloud, security and machine to machine are expanding nicely, but the question is, when will they get big enough to offset the decline in normal core wireline services?" McAdam said. "I think we're still a year away."

During Q4 2013, strategic enterprise service revenue grew 2.3 percent year-over-year to $2.14 billion due to strong sales of data center, cloud and security services. Strategic services now make up 59 percent of Verizon's global enterprise revenue.

However, overall business service revenues declined 5.2 percent to $3.6 billion due to slower enterprise and public sector spending.

Interestingly, the recent spate of credit card security breaches at Target and the banking market have ignited new activity in Verizon's Cybertrust division.

"Because of all of the attacks of that are going on to the retailers and the banking system we have a tremendous amount of business in our Cybertrust asset," McAdam said. "We frankly can't meet the demand out there at this point, so depending on how that takes off that could accelerate the goal."

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