Rackspace entertains possible takeover suitors

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: