Two Texas Web Hosting Titans Joining Forces

Merger between SoftLayer and The Planet to create stronger competition for another big Texan player, Rackspace Hosting.

After acquiring a 70 percent equity stake in SoftLayer on August 3, 2010, GI Partners now plans to create a Web hosting powerhouse.

The Planet, based in Houston will merge with SoftLayer, which relocated its new corporate headquarters to a three-building complex in North Dallas on July 12.

Both companies combined will generate about $300 million in revenues annually, serve more than 25,000 customers and manage more than 78,000 servers in total, effectively making them the second largest Web hosting provider in the U.S. behind Rackspace Hosting.

San Antonio-based Rackspace (NYSE: RAX) reported on August 9, 2010 that its profits jumped 60 percent to $11.2 million in the second quarter, while revenue rose 23.2 percent to $187.3 million. As a comparison, total server count for the formidable competitor at the second quarter was 61,874, up from 59,876 the previous quarter and the customer count was a healthy 108,023 in total.

Lance Crosby, CEO of SoftLayer, who will be assuming duties as chief executive when the union finalizes in the next few months, outlines the advantages of the merger: “SoftLayer and The Planet have a lot in common: solid customer bases, broad product and service lines, a high level of commitment to the cloud, and more. We also have different strengths - The Planet provides different services, such as collocation, on a large scale, and SoftLayer leverages automation expertise to deliver innovative solutions. Together, we can provide customers greater value through a wider continuum of services and the most scalable, automated, and cost-effective global infrastructure.”

Douglas Erwin, CEO of The Planet, is equally as optimistic about the new opportunities being created by merging both Web hosting leaders: “It would double the size of our already powerful network. We would have geographically dispersed data centers with operations not only in Texas, but also in Seattle, Washington and London. With additional capital, we would have opportunities to create an expanded international footprint for our data centers and operations. The automation capabilities would make it even easier for (our customers) to do business with us. In short, there’s unparalleled opportunity.”

Consulting firm Bain & Company has been retained to help in the integration process to ensure orderly transition of systems, facilities, customers and employees.