Report: IBM, EMC Among Suitors for SoftLayer

A look at the racks inside the new SoftLayer Technologies DA5 data center in Dallas (click for larger version).

A look at the racks inside a SoftLayer Technologies data center in Dallas (Photo: SoftLayer Technologies)

Are we on the brink of another intense flurry of cloud hosting acquisitions? Reuters is reporting that tech titans IBM and EMC are bidding to acquire SoftLayer Technologies, one of the world’s largest hosting and cloud service providers. The news service doesn’t name its sources, but projects that a sale could fetch more than $2 billion. According to Reuters, SoftLayer has hired Morgan Stanley and Credit Suisse to run the sale process, which reportedly was kicked off with an offer from AT&T.

SoftLayer has often been mentioned as one of the industry players positioning for either a sale or an IPO. The company is owned by private equity firm GI Partners, which combined it with The Planet in a 2010 merger that vaulted it into the top tier of global players in the hosting business. The company provides dedicated servers and cloud hosting to more than 25,000 customers.

That huge customer base makes SoftLayer an attractive acquisition target for companies hoping to quickly boost their presence in retail hosting and cloud services. SoftLayer has a huge global infrastructure platform, managing more than 100,000 servers in 13 data centers  Dallas, Houston, San Jose, Seattle, northern Virginia, Singapore and Amsterdam. It also has a built-in revenue ramp up within its customer base, which includes a mix of tech-savvy startups and traditional dedicated server customers.

The company has capitalized on that opportunity to build momentum for hybrid cloud installations featuring Flex Images, a service which allows customers to copy and store an image of a cloud or dedicated server, and then redeploy the image on either type of computing environment.

It remains to be seen whether a deal materializes. But if  the Reuters report is accurate, it suggests that three of the world’s largest technology companies feel the need to accelerate their cloud businesses with a major acquisition. Should one manage to close a deal for SoftLayer, the other contenders may feel even greater pressure to line up a deal. That was the pattern in early 2011, when we saw three deals in short order – Verizon bought Terremark for $.14 billion, after which Navisite was acquired by Time Warner Cable, and CenturyLink snapped up Savvis for $2.5 billion.

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About the Author

Rich Miller is the founder and editor at large of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.

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