Texas-Based Web Hoster Could be Worth Billions to IBM or EMC

By Doug Barney

Softlayer Technology, Inc., which prides itself on being the largest privately owned website hoster, may not be private for long. The Dallas-based company has formerly put itself on the market working with Credit Suisse and Morgan Stanley to handle the sale, according to Reuters reports.

The news agency is reporting high interest from IBM and EMC, perhaps for a different reason, and the story suggests the sales price could be in excess of $2 billion.

So how is a company, whose last reported revenue of $335 million in 2012, worth two billion dollars? Growth potential, customers and intellectual property – that’s how. In fact, at $2 billion, it is a fairly low multiple of revenue.

IBM, like Microsoft, is pretty much “all in the cloud” and snagging SoftLayer with its 25,000 customers could be a boon, offering a way to sell additional IBM cloud services.

The EMC angle is a bit more complicated. EMC itself offers an array of cloud solutions, including backup and recovery, as one might expect, as well as more discrete application services such as hosting Citrix XenDesktops in the cloud.

The latter is particularly interesting since EMC also owns VMware, which, through its vSphere tool, is considered a leader in the private cloud space. A private cloud is really just an installation of highly virtualized servers – which, through sophisticated orchestrations, fail over and a bit of excess capacity – and appears as a utility, offering computing on demand.

One problem with private clouds is that to be on demand, you need to have some space to grow. Unused capacity is an expense, and even when not used, still has to be managed. Some shops use cloud bursting where the private cloud taps into public or offsite clouds for needed processing or storage. SoftLayer could offer a way for vSphere shops to create this hybrid cloud.

Right now, SoftLayer is aimed at SMBs, but with its enterprise reach, either EMC or IBM could move the services up market.

According to reports, AT&T wanted to buy SoftLayer. After the Web hoster put itself up for sale, AT&T dropped out and EMC and IBM stepped in.

Edited by Braden Becker

MSPToday Editor at Large

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