CenturyLink Wants to Acquire Rackspace: Bloomberg Report

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This article originally appeared at The WHIR

CenturyLink is in talks to acquire cloud provider Rackspace, according to a report by Bloomberg on Monday. Citing anonymous sources familiar with the matter, the report said that odds of the deal going through are “less than 50 percent unless Rackspace is willing to take payment in stock or enter a joint venture.”

Rackspace hired Morgan Stanley in May to help evaluate its options, and this is not the first time CenturyLink’s name has come up as a possible buyer. In June, Citigroup speculated that the teleco would acquire Rackspace as it would give them exposure to OpenStack, although it could be difficult to fold in to its existing portfolio, which includes Savvis and Tier 3.

Rackspace and CenturyLink have both declined to comment on the rumor.

Rackspace’s stock has fallen around 53 percent from a record closing price of $79.24 in January 2013. The stock closed at $37.24 on Sept. 5.

Rackspace has taken a hit in terms of market share in the US as AWS, Google and Microsoft have grown their cloud offerings. A recent report by Gartner showed Rackspace is leading in Europe’s cloud managed hosting market, though. Its European presence could be complementary to CenturyLink’s European operations via Savvis, which has grown over the past couple of years with a new data center in London and increased connectivity.

Private cloud could also be an area of possible synergies as CenturyLink Technology Solutions (formerly Savvis) has launched a new private cloud service in August. Rackspace’s private cloud offering is based on OpenStack.

Earlier this year, CenturyLink slashed its public cloud prices and added new support bundles. As part of the upgrades to support, CenturyLink introduced Cloud Technical Service Engineers which provide day-to-day support, proactive advisory services and account management, a service designed for enterprises to make the most of out of their cloud. Rackspace has always focused on differentiating its cloud services through its Fanatical Support, so support could be another area of interest for CenturyLink.

At this point, the deal is pure speculation, but it does seem to indicate that there is still interest in finding Rackspace a buyer.

This article originally appeared at: http://www.thewhir.com/web-hosting-news/centurylink-wants-acquire-rackspace-bloomberg-report