IBM and EMC are rumored to be in talks to buy privately-held web hosting company SoftLayer Technologies

IBM, EMC Eye SoftLayer for Potential Acquisition: Reports

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IBM and EMC are rumored to be in talks to buy privately-held web hosting company SoftLayer Technologies, according to a report by Reuters on Thursday night.

SoftLayer has hired Morgan Stanley and Credit Suisse to run the sales process, which reportedly began with SoftLayer customer AT&T seeking exclusive talks. According to Reuters’ anonymous sources, AT&T is no longer interested, but SoftLayer could fetch $2 billion from remaining interested parties.

Founded in 2005 and headquartered in Dallas, Texas, SoftLayer provides dedicated servers and cloud hosting to more than 25,000 customers worldwide. Its focus on innovation – seen through its technology, but also its startup customers which include Path, SendGrid and Slideshare – has been crucial in helping it compete in a market dominated by AWS.

In 2010, after GI Partners acquired a majority stake in SoftLayer, the latter revealed to the WHIR that it was in discussions for a merger with GI’s property The Planet. The merger was completed in November 2010 to make SoftLayer one of the largest privately-held hosting companies in the world.

“The rumor mill is always churning but the potential interest from large IT players speaks positively to the value that hosters deliver,” Philbert Shih, managing director at Structure Research says. “The fact is building an infrastructure hosting platform is hard to do and it does not get built over night. It takes repeated trials that are built through years of experience. Faced with that dilemma, large strategic buyers looking at the space are naturally going to consider M&A as a possible option.”

SoftLayer is a hot buy for either IBM or EMC. While SoftLayer has a substantial customer base which it has grown in a short time, its technology and massive infrastructure of 100,000 servers in 13 data centers is surely what IBM and EMC are after in light of their recent investments in developing their cloud offerings.

IBM has ramped up its focus on cloud recently, last week revealing an OpenStack-based private cloud service, and the eventual move of all of its cloud services to open cloud architecture. SoftLayer launched its SoftLayer Object Storage based on OpenStack Swift in 2011, but SoftLayer Private Clouds solution is built on Citrix CloudPlatform, powered by Apache CloudStack.

EMC owns about 80 percent of VMware, according to GigaOM, and yesterday it confirmed that it is building its own public IaaS cloud.

Last year, EMC named John Roese chief technology officer to shape its strategy, focused on cloud and big data. Around the same time, EMC acquired data center and cloud infrastructure management provider Watch4Net and cloud-based file management solutions provider Syncplicity.

If the acquisition goes through, Data Center Knowledge, in Report: IBM, EMC Among Suitors for SoftLayer, says that “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 $1.4 billion, after which Navisite was acquired by Time Warner Cable, and CenturyLink snapped up Savvis for $2.5 billion.”

SoftLayer has declined to comment.

Talk back: What do you think of the SoftLayer acquisition rumors? Do you think SoftLayer would be a better fit for IBM or EMC? Let us know in a comment.

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