Rackspace entertains possible takeover suitors

Rackspace entertains possible takeover suitors

Summary: Rackspace, the Web hosting company behind OpenStack, has been approached by companies looking for strategic partnerships or acquisitions.


At OpenStack Summit in Atlanta, GA, one of the topics of bar conversation was why Rackspace, one of OpenStack's founding companies was keeping such a low profile at the show. Now we know it was probably because the company had been approached by companies looking for strategic partnerships or acquisitions.

RackSpace Logo

According to a RackSpace SEC 8-K report, "In recent months, Rackspace has been approached by multiple parties who have expressed interest in exploring a strategic relationship with Rackspace, ranging from partnership to acquisition."

Therefore, Rackspace's "board decided to hire Morgan Stanley to evaluate the inbound strategic proposals and to explore other alternatives which could advance Rackspace's long-term strategy. No decision has been made and there can be no assurance that the Board's review process will result in any partnership or transaction being entered into or consummated. The company has not set a timetable for completion of this process and does not intend to discuss or disclose further developments with respect to this process unless and until the Board approves a specific partnership or transaction."

This news comes on the heels of Rackspace's first quarter report in which the company beat its first quarter's earnings estimates with $421-million in revenue. It also comes after a record-breaking OpenStack Summit with more than 4,500 attendees.

On the other hand, the New York Times has reported that Rackspace's shares have lost more than half their value since January 2013. The Times blamed increased competition from public cloud providers such as Amazon and Google. In the aftermath of Rackspace's announcement, the stock price has risen over 19 percent by noon on May 16 on extremely high volume.

Related Stories:

Topics: Cloud, Enterprise 2.0

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.


Log in or register to join the discussion
  • Well, I've heard of two suiters, and zoot suiters, but not takeover suiters

    So is a takeover suiter a piece of luggage, or a new style of garment?
  • "Suitors"...

    It's "suitors", Steve.
  • IBM to Buy ?

    Watch This Space
    Alan Smithie
  • Rackspace My be too small to live independently

    Rackspace's time as a loner in the cloud business is going to be short. It is simply too small to stand against the deep pockets of Amazon, Microsoft, Google, and IBM, to name a few. Rackspace sells in the millions per year, while all the big guys are selling in the billions. Its servers are numbered in the thousands: others number around a million.

    It seems that Rackspace realizes its predicament because they are hiring a financial firm to find a way to live, if not independently, at least as a partner. I am not surprised that other firms have made a play for them.

    I don't see that Rackspace has enough unique talent or product to justify a large buyout--something on the order of IBM's buyout of SoftLayer. After all, Rackspace is selling Open Source stuff, and other, more well funded firms are doing that, too. It's success in promoting Open Source may well be its downfall. Irony is not lost in the age of big iron.