Rumors Continue To Swirl About Rackspace’s Acquisition By CenturyLink

Rumors continue to abound that Rackspace is on the verge of acquisition, but we’ve heard little in the way of definitive news about a prospective vendor just yet. On September 7, Bloomberg reported that CenturyLink is interested in acquiring the San Antonio-based IaaS vendor turned managed cloud hosting provider. A CenturyLink acquisition of Rackspace would make sense given its cash on hand and previous acquisitions of Savvis and Tier 3. That said, Rackspace’s market value of $5.6B based on share prices renders it an extremely expensive purchase that may not easily yield the return on investment sought by its acquirer. Moreover, Rackspace’s recent decision to pivot on its core IaaS offering by delivering managed cloud hosting services fails, at a glance at least, to deliver reusable intellectual property to the degree required of a $5.6B purchase. In any case, Rackspace’s decision to transition toward managed cloud hosting represented a strategic maneuver that materialized far too late for it to remain even remotely competitive in a market landscape featuring the likes of Amazon Web Services, Microsoft Azure and Google Compute Engine. The only hope for the San Antonio-based company, now, is that a buyer emerges with the cash and strategic vision to subsume Rackspace’s technology, people and processes into a larger enterprise infrastructure on the scale of a telecommunications provider such as CenturyLink. The more that rumors proliferate about Rackspace’s acquisition with no ensuing result, however, the more deleterious the result will be for Rackspace in its attempt to find its footing, let alone a buyer.

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