Seeking Alpha

Rackspace skyrockets; Street sees plenty of potential suitors

  • "Because Rackspace (RAX +18.4%) operates the largest production deployment of OpenStack and is the [#2] public cloud provider to [Amazon], it could be a strategic asset to other companies ... such as AT&T, IBM, EMC, HP, and VMware," says Blair's Jim Breen following a Bloomberg report about Rackspace's hiring of Morgan Stanley to evaluate "inbound strategic proposals."
  • Worth noting: IBM, H-P, AT&T, and VMware already offer their own cloud infrastructure services, and VMware supports an OpenStack rival (its vCloud platform). Moreover, any potential buyer will likely take a close look at Rackspace's long-term ability to handle Amazon/Microsoft/Google's aggressive pricing.
  • Nonetheless, the Street sees plenty of possibilities, given Rackspace's size and OpenStack software/services investments. Dell and Cisco are a couple of the other names brought up. Blair thinks Rackspace could get $54/share, given recent deal prices.
  • Over 11% of the float was shorted as of April 30. Shares are up 29% since Bloomberg's report broke just before Thursday's close.
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Comments (1)
  • Ivan Ivanković
    , contributor
    Comment (1) | Send Message
     
    Eventhough AT&T acquired DirecTV last week, acquisition of Rackspace could make a lot of sense for both parties. ivanivankovic.com/blog...
    21 May 2014, 06:24 AM Reply Like
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