We’ve been hearing rumors of a Rackspace acquisition for the last several months. The latest suitor according to Bloomberg could be Louisiana-based telco CenturyLink, but before we get too excited here, let’s keep in mind Microsoft, HP, Cisco and others were supposedly interested too, and in the end nothing came of it.
And as you would expect in a case with so much uncertainty swirling around the organization, Rackspace stock prices have been on a roller coaster ride this year. With each passing rumor, the stock price rises a bit, and then when the suitor walks, it falls back to earth.
There were even rumors in July that Rackspace wanted to take itself private. The fact is that there might have been some truth to all of these stories, but in the end the company decided not to do it, or the suitor simply felt it wasn’t a good fit.
In today’s cloud market climate, a mid-tier player like Rackspace has been caught between a rock and a hard place for some time, squeezed in an infrastructure service market dominated by big players like Amazon Web Services, Google Cloud and Microsoft Azure. As these players engage in a fight to the bottom in an escalating pricing war, a company like Rackspace whose main focus is infrastructure services finds it increasingly difficult to compete, especially when these other companies can cover their losses with more profitable parts of their organizations.
After all, companies are in business to make money and if the cost of their services is becoming pennies on the dollar, it’s hard to make any profit. Faced with that kind of landscape, Rackspace walked away from the IaaS market altogether last month, moving to what they were calling a managed approach. In other words, they would help companies manage their cloud services.
That seems like a bit of a stretch given the cloud is supposed to simplify the overall management IT, but I suppose you could argue that as companies move to a hybrid approach or have a bushel of cloud services, having a third-partner to help manage all of that could have some value. At least Rackspace is betting that’s the case.
If you do a Google search on potential Rackspace buyers, you’ll see a rumor followed by a denial that the rumored company is interested, but in this case, the rumor makes more sense than ever. CenturyLink is a logical landing spot for a company like Rackspace and would fit in with their purchase of Tier 3 last November. If you combine Tier 3’s infrastructure and platform plays with Rackspace’s managed services and customer service orientation, it could be a good match, especially in light of other cloud acquisitions the company has made over recent years.
Of course, HP made a lot of sense too, given HP’s new obsession with OpenStack, and the fact Rackspace is one of the founding members of the OpenStack project, and nothing ever became of it.
At this point, all of the uncertainty has to be hurting the company and there needs to be a resolution. We’ve been hearing these rumors for months. Will somebody please buy Rackspace already and let us all move on.
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