IBM Has Brilliantly Snatched Away A $2 Billion Cloud Company From EMC (EMC, VMW, IBM)

AP

IBM CEO Ginni Rometty

For months, IBM and EMC have been duking it out with each other to buy Dallas-based SoftLayer, one of the nation's largest, private cloud computing providers.

And IBM just won.

IBM bought SoftLayer for an undisclosed amount. The deal has to be significant, though, because SoftLayer had estimated revenues of about $400 million last year and a valuation of well over $2 billion.

SoftLayer has about 21,000 customers for its web hosting and cloud services and 13 data centers in the U.S., Europe and Asia, mostly small and mid-sized customers.

EMC wanted this company as a jump start for the new cloud initiatives launched by its subsidiary, VMware. In the past couple of months, VMware launched vCloud (an Amazon-like infrastructure cloud service for enterprises) and Pivotal (a Microsoft-Azure like cloud for developers). SoftLayer would have given it the big international data centers it needs.

Plus, one of SoftLayer's big customers is Citrix, VMware's biggest competitor. Stomping on Citrix would have been a bonus for EMC.

At one point, it looked like EMC might have an edge, too. Venture capitalist David Strohm sits on the boards of EMC, VMware and SoftLayer.

But, alas, not so.

IBM wanted SoftLayer for obvious reasons, too. It instantly gives IBM game with small-to-medium-sized businesses, a fast-growing segment. IBM's home-grown cloud has been geared for large enterprises, particularly multinationals.

SoftLayer will help IBM compete with the lower-end cloud market dominated by Amazon. IBM pointed out in its press release that gaming companies, a particular Amazon stronghold, have been flocking to SoftLayer of late. More than 60 new gaming companies have signed up in last two quarters, it said.

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