SoftLayer and The Planet Shed Light on Merger

(Ping! Zine) – In 2005, 10 of The Planet’s management staff departed to form SoftLayer. Five years later, SoftLayer and The Planet are looking at a potential merger. In a move that Doug Erwin, CEO of The Planet, jokingly referred to as, “what goes around comes around; life is an endless circle,” The Planet and SoftLayer’s proposed merger would definitely be a fitting close of the loop. The merger would create one of the largest dedicated hosting companies in the world with more than 25,000 customers and some 78,000+ servers.

Although the merger is not yet a done deal between the two companies, both Lance Crosby, CEO of SoftLayer, and Doug Erwin believe the end is almost in sight. During a phone conversation on Friday, Lance and Doug gave their thoughts on the merger deal brewing between the two companies.

“Is this 100% done deal? Well we can’t say we are 100%, but we are really close to that. And Doug and I are really close to putting these two companies together in the next 90 days,” says Lance.

Doug adds, “Let me put it another way. It’s not over till the fat lady sings.. and she is warming up on the side. There is a lot of work that needs to be done between our two staffs and I think we are going about it the right way, in that we hired an outside consultant… Bain Consultant to come in and work with us.”

As both sides continue to look at the merger, one of the number one concerns has been to ensure the current customers are treated well. Regarding the customers Erwin says, “I think the biggest concern Lance and I have is for a seamless integration that does not affect the customer.” To this end, Bain & Company consulting has been brought in to ensure that the possible merger avoids the many pitfalls that can occur.

“About 6 months ago G.I. Partners approached SoftLayer about doing an investment in the company,” Lance explains. “They have done a lot of investment in this space overall including Digital Realty, Savvis, Telx, The Planet and most recently ViaWest. After they approached us and we started going through due diligence, we began to find there was a lot of common DNA with The Planet and so as we began to close the process over the last 30 days or so, we started exploring the possibility of putting these two companies together.”

That common DNA doesn’t just extend to the family history between the two companies. It also includes many mutual customers. They both also target the dedicated and cloud hosting space. However, if both companies were purely similar, merging them would simply create a larger company, which is technically not a bad thing…, but it would be somewhat boring.

In addition to the similar fields of interest, SoftLayer brings their infrastructure know how. The plans for the merger include moving customers to SoftLayer’s automation layer. This translates to the new company able to take on more customers, keeping staff low, and yet maintaining their high-grade support.

The Planet offers an enterprise level suite of services. Namely, The Planet will bring colocation and managed hosting to the party. Along with these hosting addons, The Planet also brings in enterprise level hosting features and the expertise in handling those services.

SoftLayer, up until recently, has avoided the colocation and managed hosting spaces. They have instead focused on their target niche and have not deviated from that path. And yet, if they do merge with The Planet, adding those services is part and parcel of the new company. So why now? Why would SoftLayer, who have been disciplined in avoiding the watering down of their brand, want to increase their services and in fact, consider adding those services as a definite strength?

“It’s been on the drawing board for a long time and we are going to bring a SoftLayer approach to those two types of services that are not yet seen in the industry. As we talk about it internally we are going to pull out a big stick and poke a lot of our competitors in the eye when they see what we are going to do to colocation and managed services,” says Lance.

On the possibilities of an IPO, Lance says, “I think that [an IPO] is the most logical step for the combined companies, putting them together they are going to be about 300 million in revenues and growing rapidly and you get to a point where the number of potential suitors out their drops dramatically simply because of the size of the company so an IPO becomes the natural choice.”

“So if you want to sum it up, you could say we are strapping on the gloves, ” says Doug. However, you sum it up, the potential merger between The Planet and SoftLayer could be a hosting juggernaut rivaled by very few especially in the dedicated server market.