Recommended Free Tools
IBM bought SoftLayer to accelerate its public-cloud infrastructure business and add automated hosting for both virtual machines and dedicated servers. The acquisition closed on July 3, 2013, for $1.977 billion in cash, according to IBM’s later SEC filing. Strategically, the deal filled a gap in IBM’s cloud offering; whether it was a financial success is harder to establish from the early figures alone.
Why did IBM buy SoftLayer?
IBM announced a definitive agreement on June 4, 2013, and completed the acquisition on July 3 after customary approvals. IBM said businesses wanted a trusted provider able to support public, private and hybrid cloud deployments, with enterprise reliability, security and management. SoftLayer was intended to speed IBM’s public-cloud build-out and give customers more infrastructure choices.
IBM’s 2013 annual report described the intended combination as “the security, privacy and reliability of private clouds and the economy and speed of a public cloud.” The logic was to join IBM’s enterprise relationships and services with a cloud platform designed for on-demand infrastructure, rather than rely only on IBM’s existing SmartCloud offerings.
How much did IBM pay for SoftLayer?
IBM paid $1.977 billion in cash for 100% of SoftLayer, as recorded in IBM’s 2013 SEC filing. IBM’s June announcement did not disclose financial terms; the figure comes from the later accounting disclosure.
#1 Best Overall
At the time, Reuters reported that Wells Fargo analyst Gray Powell estimated the price at 11.1 times SoftLayer’s projected 2013 EBITDA. That was an analyst’s valuation estimate based on projected earnings, not a purchase-price multiple calculated from audited full-year results.
What did SoftLayer add to IBM Cloud?
SoftLayer, based in Dallas, provided infrastructure-as-a-service: on-demand dedicated servers, virtual cloud servers and private clouds. IBM positioned the platform for performance-intensive mobile, social, gaming and analytics workloads.
Rank #2
- Ideal for Gifting
- Ideal for a bookworm
- Compact for travelling
Automation across virtual and dedicated servers
The technical distinction highlighted by Gartner analyst Lydia Leong was SoftLayer’s automation. She described a platform that handled virtualized and non-virtualized servers with similar ease, bringing cloud-like features to bare metal: hourly billing, automated provisioning, API and graphical interfaces, and provisioning from images. That mix gave IBM an infrastructure option spanning virtual machines and dedicated hardware.
IBM’s benchmark claim
IBM’s announcement FAQ said a Tomcat test ran almost 10 times faster than Amazon EC2’s small instance and about 30–40% faster than Amazon’s high-CPU model. This is IBM’s own benchmark claim as reproduced in the FAQ, not an independently reproduced comparison; it should not be treated as a general performance ranking.
Customer counts reported at the time
IBM’s announcement FAQ listed 21,000 SoftLayer customers worldwide, while Reuters’ contemporaneous account reported 25,000. These are source-specific figures, and the available accounts do not establish a single reconciled count.
Was the IBM-SoftLayer deal a good deal?
The answer depends on whether the deal is judged by strategic fit, technical capability, purchase price or subsequent execution. The contemporaneous commentary captured both sides: ISI Group analyst Brian Marshall called it a solid strategic move to strengthen IBM in higher-growth cloud services and provide an alternative to established vendors; analysts also faced the execution challenge of competing with Amazon Web Services, Rackspace, Microsoft and others.
Rank #4
| Measure | What the evidence shows | What it does not establish |
|---|---|---|
| Strategic fit | IBM sought broader public, private and hybrid cloud options and a faster public-cloud build-out. | Strategic intent by itself does not prove the acquisition earned an adequate return. |
| Technical differentiation | SoftLayer combined automated provisioning with virtual and bare-metal infrastructure. | IBM’s cited Tomcat comparison was not an independent, broadly applicable performance test. |
| Price | IBM reported $1.977 billion in cash; Wells Fargo’s contemporaneous estimate was 11.1 times projected 2013 EBITDA. | The estimate is not a definitive valuation based on audited actual EBITDA. |
| Early execution | IBM later reported cloud revenue growth and committed substantial investment to expand its cloud data-center footprint. | These company-wide and investment figures do not isolate SoftLayer’s contribution or establish deal-level profitability. |
What happened after the acquisition?
IBM’s third-quarter 2013 Form 10-Q said the acquisition “significantly improves” its capabilities in public and hybrid cloud solutions. In that quarter, IBM reported more than $1 billion in cloud revenue, including about $460 million in cloud-delivered services and solutions. IBM also said cloud revenue had risen more than 70% through the first three quarters of 2013 compared with the same period a year earlier.
Those figures indicate momentum in IBM’s broader cloud business, but they are not SoftLayer-only revenue figures. IBM’s 2013 annual report separately reported $4.4 billion in cloud-based-solutions revenue and said SoftLayer enabled offerings combining private-cloud control with public-cloud economics and speed. The annual-report measure and the quarterly cloud-revenue figures are differently described company metrics, so they should not be added together or treated as a direct accounting bridge.
Free tools Windows power users keep installed
One-click scans. No signup required.
Best Value
- It can be a gift option
- Comes with secure packaging
- Helpful in various ways
In 2014, IBM committed $1.2 billion to expand SoftLayer centers, with a plan to double the centers and reach 40 cloud data centers in 15 countries. That commitment is evidence IBM continued investing in the platform; it is not, on its own, proof that the acquisition met a particular return target.
What can be concluded about the deal?
The acquisition had a clear strategic rationale: SoftLayer gave IBM an automated infrastructure platform covering both virtual servers and dedicated hardware, supporting IBM’s effort to offer a broader public- and hybrid-cloud portfolio. IBM’s early cloud growth reports and its 2014 expansion plan show that the company invested behind that strategy. They do not isolate SoftLayer’s financial contribution, however, so the available evidence supports a judgment that the deal strengthened IBM’s cloud capabilities—not a definitive conclusion about its standalone financial return.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
