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IBM Acquiring SoftLayer to Boost Its SmartCloud: What the 2013 Deal Meant

IBM bought SoftLayer to accelerate its public-cloud build-out and broaden customer deployment options. The acquisition closed in July 2013 for $1.977 billion in cash.
From TheFinanceBase Team2 min to read
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IBM acquired SoftLayer to speed up its public-cloud expansion and give customers more ways to combine public and private infrastructure. The company announced the agreement on June 4, 2013; it completed the acquisition of 100 percent of SoftLayer on July 3 for $1.977 billion in cash, according to IBM’s SEC filing. IBM publicly announced the closing on July 8.

What IBM intended to gain

IBM presented SoftLayer as an addition to its cloud infrastructure, not a replacement for SmartCloud. Its plan was to combine SoftLayer and IBM SmartCloud in a new global cloud services division, bringing public-cloud infrastructure together with IBM’s enterprise cloud portfolio.

IBM said the combination would make it easier and faster for clients to add cloud computing to their infrastructure and choose among public, private, and hybrid deployments. IBM positioned its own strengths as enterprise reliability, security, management, openness, and customer relationships; it described SoftLayer as bringing an established public-cloud platform and more infrastructure options. These were IBM’s stated strategic claims, not an independent assessment of either provider.

“With SoftLayer, IBM will accelerate the build-out of our public cloud infrastructure to give clients the broadest choice of cloud offerings to drive business innovation.”

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— Erich Clementi, IBM Senior Vice President, Global Technology Services, in IBM’s June 4, 2013 announcement

At the time, SoftLayer’s offerings included dedicated and shared servers, virtual servers, private cloud, storage, networking, and security services. The mix mattered to IBM’s pitch: customers could select different infrastructure types rather than rely on a single deployment model.

How the acquisition unfolded

Date What happened
June 4, 2013 IBM announced a definitive agreement to acquire SoftLayer. The announcement said financial terms were not disclosed.
July 3, 2013 IBM completed the acquisition of 100 percent of SoftLayer for $1,977 million in cash consideration, as reported in IBM’s SEC-filed third-quarter disclosure.
July 8, 2013 IBM publicly announced the closing and said SoftLayer would join the new cloud services division alongside SmartCloud.

The June announcement’s lack of a price and the later $1.977 billion figure are not contradictory: the transaction terms were reported after the initial announcement, in the SEC filing covering the completed deal.

What SoftLayer brought to the deal

IBM reported in its 2013 announcement that SoftLayer had approximately 21,000 customers and 13 data centers across the United States, Asia, and Europe. These are IBM’s announcement-era figures, not current counts.

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The scale and infrastructure options supported IBM’s stated objective of expanding its public-cloud capacity and broadening deployment choices. Contemporaneous coverage also framed the deal in terms of hybrid infrastructure. Structure Research managing director Philbert Shih described it as a response to “the new realities of IT infrastructure: delivery in a service model and the flexibility to mix and match different types of infrastructure in hybrid scenarios.”

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What the deal did—and did not—say about SmartCloud

The acquisition announcement described a 2013 plan to integrate SoftLayer with SmartCloud in a global cloud services division. It should not be read as a description of IBM’s current product names, service lineup, or cloud strategy. The historical significance is that IBM sought to strengthen its public-cloud infrastructure while retaining the enterprise management and deployment choices it emphasized for customers.

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IBM’s rationale was strategic positioning, not a published general performance comparison. The company’s FAQ included a third-party test comparison, but that result was specific to its test conditions and does not establish that SoftLayer was universally faster than alternatives.

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