CenturyLink will compete with public cloud services such as Amazon's (AMZN) Amazon Web Services, in which a company's data or content is available on the Internet with multiple users outside the business accessing the same data at the same time. Netflix (NFLX), for instance, uses Amazon Web Services to stream movies.
CenturyLink did not disclose the price. Bloomberg reported that the telecom paid $200 million for Tier 3.
CenturyLink gained a foothold in cloud services with the $3.2 billion purchase of Savvis in 2011 and the purchase of AppFog, which provides cloud services to application developers.
A customer might have used CenturyLink's Savvis service for its private, internal cloud computing and hired Amazon Web Services for support of its public web site. The purchase of Tier 3 allows CenturyLink to compete for both public and private cloud contracts.
Based in Bellevue, Wa., Tier 3 raised $10 million from Intel Capital, Ignition Capital and Madrona Venture Group in October 2012. The fundraising brought the company's total funding to $18.5 million since its founding in 2006.
The sale may draw attention to cloud companies such as Joyent, GoGrid, and Virtustream. San Francisco-based Virtustream raised $40 million in a September round of financing led by SAP AG.
Evercore bankers Eric Mandl, Dan Mendelow, Vikram Rao, Chris Keuler and Nitish Lakhanpal advised Tier 3, which retained Craig Sherman Wilson Sonsini Goodrich & Rosati as counsel.
Ken Najder, Allison Bell, Britt Seal and Kelly Simoneaux of Jones Walker advised CenturyLink.
--Written by Chris Nolter in New York