International Business Machines Corp. (NYSE:IBM) announced today to purchase cloud computing company SoftLayer Technologies. The world’s largest IT services firm didn’t disclose financial terms of the deal, but people familiar with the matter told Sarah Frier of Bloomberg that International Business Machines Corp. (NYSE:IBM) is paying about $2 billion for the Dallas-based company.
SoftLayer Technologies was founded in 2005. It claims to be the world’s largest privately-held cloud services firm. The company specializes in public clouds, managing data storage and software for businesses remotely. It offers services to more than 25,000 customers including Citrix Systems, Inc. (NASDAQ:CTXS) and AT&T Inc. (NYSE:T) through its 13 data centers across the United States, Asia and Europe. It started looking for a potential acquirer in early 2012. SoftLayer has been in talks with IBM for more than six months.
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IBM Cloud Services
International Business Machines Corp. (NYSE:IBM) started offering cloud services in 2007. Since then, the Armonk, New York-based company has spent more than $4.5 billion to acquire several small cloud service providers, the company spokeswoman Colleen Haikes said. IBM has planned to generate at least $7 billion in annual cloud revenues by 2015. The acquisition will help it compete directly with Amazon.com, Inc. (NASDAQ:AMZN).
SoftLayer Technologies posted a revenue of $335 million in 2012. According to Wells Fargo analyst Gray Powell, the deal values SoftLayer Technologies at 11.1 times its estimated 2013 EBITDA. Cloud services firms have increasingly become takeover targets as tech firms look to improve cost efficiencies of their cloud operations.
SoftLayer Technologies will help International Business Machines Corp. (NYSE:IBM) provide cloud services to business as well as individual customers. IBM said it will combine its own cloud operations with SoftLayer to form a new division called Cloud Services. SoftLayer is currently held by GI Partners, which bought the company in 2010. International Business Machines Corp. (NYSE:IBM) said the deal is expected to close in the third quarter.
International Business Machines Corp. (NYSE:IBM) share were down 1.38 percent to $206.06 at 3:27 PM EDT.