IBM, Salesforce Strike Deals to Purchase Cloud Computing Companies

Joe Goldman |

IBMIBM (IBM) announced on Tuesday that it has agreed to acquire Softlayer Technologies, a privately held cloud computing computing company. The deal is rumored to be in the ballpark of $2 billion and reflects IBM’s multi-year effort to expand its cloud computing services.

Salesforce.com (CRM) also announced Tuesday that it will acquire cloud marketing firm ExactTarget (ET) for around $2.5 billion. ExactTarget serves major clients like Toyota, Microsoft, NASA, and Expedia, and is Salesforce.com’s largest acquisition to date.

Both deals reflect the growing demand for customer relationship management (CRM) platforms in the corporate world. They are also indicative of the sky-high valuations of cloud-based companies, as ExactTarget was purchased at a 53% premium.

As a result of the Softlayer acquisition, IBM will form the IBM Cloud Services Division. Erich Clementi, who will oversee the division, said on Tuesday, “SoftLayer is a perfect fit for IBM. It will help us smooth the transition of our global clients to the cloud faster while enabling IBM to more efficiently offer them its broad portfolio of open IT infrastructure and software services.”

Meanwhile, Salesforce.com hopes to offer customers a complete CRM package with the acquisition of ExactTarget. Salesforce.com said in a press release that the acquisition will further enrich its already industry-leading CRM platform. “By combining ExactTarget’s leading digital marketing capabilities with Salesforce.com’s leading sales, service, and social marketing solutions, Salesforce.com will create a world-class marketing platform across email, social, mobile, and the web.”

IBM projects that cloud revenue will reach $7 billion annually by 2015 as a result of its aggressive global expansion. Meanwhile, Salesforce.com projects that ExactTarget will increase 2014 revenue by $120-$125 million and earnings by $0.12, despite ExactTarget’s lack of profitability over the last year.

Investors, however, were not impressed with the acquisitions. Shares of IBM traded down 1.2% to $206.66, while Salesforce.com shares dropped 3.5% to $39.59.

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
CRM Salesforce.com Inc 70.74 -1.12 -1.55 3,263,383
IBM International Business Machines Corp 165.95 0.59 0.36 1,934,447
SWH Stanley Black & Decker Inc. Corp Unit 2013 n/a n/a n/a 0

Comments

Emerging Growth

MGX Minerals Inc.

MGX Minerals is a diversified Canadian mining company listed on the Canadian Securities Exchange. MGX is engaged in the acquisition and development of industrial mineral deposits in western Canada that…

Private Markets

Uber

Uber connects riders with safe, reliable, convenient transportation providers at a variety of price-points in cities around the world. Uber makes money from charging their drivers 20% of the fare…

BioSculpture Technology, Inc.

BioSculpture Technology, Inc. (“BST”) is a commercial-stage medical device manufacturer of liposuction surgical instruments for surgeons. It offers the FDA-cleared Twin Cannula Assisted Liposuction ("TCAL") Airbrush Liposculptor II® controllers, Airbrush®…