IBM scoops up hosting outfit Corio

The move, announced Tuesday, will strengthen IBM's portfolio of application-hosting services, a $1 billion business that CEO Samuel Palmisano has singled out as an area with significant growth potential.

Through the deal, which is expected to close in 60 days, current employees of San Carlos, Calif.-based Corio will join IBM, and Corio's current CEO, George Kadifa, will continue to manage the unit. In premarket trading Tuesday, shares of Corio were selling at $2.82, a 36 percent premium over its $2.05 closing price Monday.

In a statement, IBM said that purchasing Corio fits into Big Blue's vision of more-efficient technology services.

"This acquisition is good for clients because it helps give them faster implementation, increased ease of use and variable-cost hosting solutions," said Jim Corgel, general manager of small and midsize business for IBM Global Services, the company's professional services arm.

Corio, founded in 1998, was one of several companies to launch as a so-called application service provider, or ASP, offering hosted versions of packaged applications. Many other ASPs struggled or went out of business, and Corio has not been profitable in the past four years.

Corio offers subscription-based services for several applications, including software from Ariba, Concur, Epiphany, Oracle, SAP and Siebel Systems.

IBM will also gain the software that Corio has developed to run its hosting operations. That includes tools to automate management tasks and deliver applications to customers over the Internet.