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IBM and EMC in talks to acquire web hosting company SoftLayer

IBM and EMC in talks to acquire web hosting company SoftLayer

By Reuters | Updated: 15 March 2013 17:24 IST

International Business Machines Corp and EMC Corp are among parties in talks to buy privately held database web hosting company SoftLayer Technologies Inc, in a deal that could fetch over $2 billion, three sources close to the matter said.

Dallas, Texas-based SoftLayer has hired Morgan Stanley and Credit Suisse to run the sale process, the sources said, asking not to be named because the talks are private.

The IT infrastructure specialist, founded in 2005, has become the world's largest privately held website hosting service. The company provides its 25,000 customers with cloud infrastructure mainly for small and medium-sized businesses.

SoftLayer's sale process was initially spurred by one of its customers, AT&T Inc, which approached the company in recent months seeking exclusive talks, one of the sources said. AT&T is no longer involved in the process, two of the sources said.

Spokespeople for SoftLayer, AT&T, EMC, IBM, Morgan Stanley and Credit Suisse declined to comment.

Over the last few years, web hosting companies, including Rackspace Hosting Inc, have been considered attractive takeover candidates as technology and telecom companies look to improve the performance and cost efficiencies of their enterprise cloud computing services.

In 2011, CenturyLink Inc bought managed hosting and colocation provider Savvis Inc for $2.5 billion. Also that year Verizon Communications Inc spent $1.4 billion to buy IT services provider Terremark Worldwide.

EMC has been pushing ahead with its cloud-based software business, announcing a new venture on Wednesday with VMware Inc called Pivotal Inc, which will combine both companies' data analytics and cloud application assets.

EMC and VMware are hoping that the new Pivotal will cash in on an expected jump in demand for data analytics software as companies like telecom service providers want better tools to analyze masses of data from multiple different technology platforms.

With 100,000 servers under management, SoftLayer counts VMware competitor Citrix Systems Inc as one of its customers, making it even more attractive to the current suite of buyers, the sources said.

SoftLayer is majority held by GI Partners, which purchased all of the equity in partnership with SoftLayer management in August of 2010.

In November of that year GI Partners merged The Planet, SoftLayers's biggest competitor, with SoftLayer. GI Partners had a controlling interest in hosting company The Planet, where current SoftLayer CEO Lance Crosby served as chief operations officer for five years.

Last year, SoftLayer appointed former Leap Wireless International Inc executive Walter Berger as its chief financial officer.

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