IBM and Salesforce Spend Big on Cloud Computing Acquisitions

on Jun 5, 2013
Updated: Jun 23, 2020

Two acquisition deals worth a combined $4.5 billion have highlighted the growing attractiveness of cloud computing – a market that industry experts believe is likely to more than double in value by 2016.

IBM (NYSE:IBM), the world’s largest seller of computer services, announced on its website yesterday that it had reached a definitive agreement to acquire SoftLayer Technologies Inc, a private cloud computing storage provider based in Dallas, Texas. According to inside sources the deal is worth $2 billion.

Meanwhile, San Francisco-based Inc (NYSE:CRM), which is one of the biggest cloud computing groups in the world, has bought Indianapolis-based interactive marketing provider ExactTarget for $2.5 billion in what is Salesforce’s biggest deal ever.

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**Wrestling for Position**
Cloud computing is one of the areas that IBM sees as key to support growth, especially with the company having moved from selling PCs and servers to providing information technology services to big companies and governments. The agreement to buy SoftLayer aims to put IBM in a better position to compete with U.S. online retailer Inc, which has its own cloud computing platform – Amazon Web Services (AWS). IBM plans to add SoftLayer to its existing SmartCloud unit to form a new Cloud Services division to capitalise on a market that, according to market researcher IDC, may more than double to $105 billion by 2016 as compared with 2012.

Forming a new division through acquisition will allow IBM to “get focused”, according to the company’s vice president of cloud services Ric Telford.
!m[The Salesforce stock price (pre-market) was $38.46 of 12.00 GMT, 05.06.2013 ](/uploads/story/2780/thumbs/pic1_inline.png)
“It’s all about acceleration. We had been building out but we saw SoftLayer and the acquisition was too compelling to pass up,” he said, as quoted by Bloomberg. He added that SoftLayer had the “same capabilities” as Amazon.

IBM aims to generate about $7 billion in annual revenue from cloud computing by 2015.
As a private company SoftLayer doesn’t provide quarterly reports of its financial results but in its most recent full year it generated about $400m in annual revenues, according to inside sources quoted by the Financial Times. This means that IBM has valued SoftLayer five times the company’s annual revenue.

Meanwhile, Salesforce, a major player on the cloud computing scene has fortified its position by acquiring software-as-a-service company ExactTarget. The provider of interactive marketing and social media services is the latest acquisition for Salesforce, which in recent years has acquired social media management company Radian6 and social media marketing agency Buddy Media.
Salesforce will pay $33.75 per share in cash for ExactTarget, a 53 percent premium above the company’s stock price at the close on Monday. The price is valuing ExactTarget at nearly nine times the company’s revenues of $292 million in the last fiscal year.
**The IBM stock price (after hours) was $206.00 as of 11.58 GMT, 05.06.2013**
**The Salesforce stock price (pre-market) was $38.46 of 12.00 GMT, 05.06.2013**

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