IBM Buyout of SoftLayer Stirs Up Cloud Fight Against Amazon and Microsoft

While financial terms were not formally disclosed, the purchase price is being reported as though it is gospel in the area of about $2 billion. SoftLayer is being touted by IBM as the world’s largest privately held cloud computing infrastructure provider. SoftLayer allows clients to buy enterprise level cloud services on dedicated or shared servers.

IBM’s acquisition is aimed to strengthen Big Blue’s position in cloud computing. It also is represented to help speed business adoption of public and private cloud solutions. The aim is to tie in public cloud services with the enterprise grade reliability, security and openness of IBM’s SmartCloud portfolio.

SoftLayer is based in Dallas, Texas, and is said to serve some 21,000 customers with a global cloud infrastructure platform. This includes some 13 data centers in the United States, Asia and Europe.

Wall Street is not convinced that the deal is going to severely move the needle, for IBM as shares are down 0.8% at $207.25 against a 52-week range of $181.85 to $215.90. It is unclear whether this will drive IBM’s earnings up to that key $20 per share by 2015.

This is a deal that competes with IBM’s endless share buybacks and higher dividend payment as well. At some point IBM has to go buy growth. It can only cut its salesforce commissions and benefits by so much before that generates more pain than it can realize in earnings gains.