IBM to Buy Web Hosting Provider – 06/06/2013

IBM said on Tuesday it would acquire Web hosting provider SoftLayer Technologies and create a new division for clients interested in so-called cloud services, a move to better compete with larger rivals in the space.

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Dallas-based SoftLayer, which leases online storage space to companies, was founded in 2005 and has become what it says is the world’s largest privately held website hosting service. The company provides its 25,000 customers, including AT&T Inc and Citrix Systems Inc, with cloud infrastructure.

IBM has traditionally specialized in assisting large corporate and government users but has been trying in recent years to expand into smaller businesses.

Wells Fargo analyst Gray Powell estimated that the transaction was worth 11.1 times SoftLayer’s projected 2013 earnings before interest, taxes, depreciation, and amortization.

IBM said it expected to gain $7 billion annually in revenue from cloud services by the end of 2015. It created a new division called Cloud Services, which will combine SoftLayer and IBM’s existing offerings into a global platform.