CenturyLink considers snapping up Rackspace - reports
Cloud firm mooted as an acquisition target again
Rackspace, the oft acquisition target, has another suitor.
CenturyLink is reportedly interested in acquiring the infrastructure-as-a-service pioneer to added to its cloud services capacity and expand assets against competitors such as Amazon, Microsoft and IBM.
According to Bloomberg, CenturyLink has expressed an interest in buying Rackspace, which is valued at $5.33bn (£3.31bn). However, no deal is certain, as Rackspace has retained Morgan Stanley to review its options for expanding the business and maintaining competitiveness.
Rackspace has been in precarious position for years, as competitive cloud offerings entered the market and diluted its market presence. Despite sales being up 17 per cent in 2013 and a key driver of open-stack cloud development frameworks, Rackspace is often seen as a secondary player in the cloud market and ripe for takeover.
Over the past several years, CenturyLink - a once-regional telecommunications carrier - has made several deals to expand its footprint and capacities, including the 2011 acquisition of Qwest Communications for $22bn and the $2.5bn takeover of Savvis, both in 2011. Last year, CenturyLink bought cloud service provider Teir 3 for an undisclosed sum. CenturyLink has a market cap currently estimated at $24bn.
Adding Rackspace to the CenturyLink portfolio wouldn't necessarily change the competitive cloud landscape, but it would greatly expand the company's infrastructure capacity and customer base. CenturyLink is among the scores of large and small cloud service providers trying to grab as much market share as possible through new offerings and lower prices.
By buying Rackspace, CenturyLink would bolster its competitive position against market leaders Amazon Web Services, Google, IBM (SoftLayer), and Microsoft. The leading cloud providers are locked in a pricing war, driving down the raw storage and computing cost to capture customers. While CenturyLInk is participating in the pricing war, its strategy is to remove cost from the equation and have customers select packages based on quality, capabilities and support.
"These changes demonstrate our scale and ability to put customer choice and flexibility front and centre. And you can be sure that there's much more in store for CenturyLink Cloud and our customers as we charge ahead," CenturyLink CTO Jared Wray said in a blog post.
For Rackspace, talk of acquisitions has come before, with Dell, Microsoft and IBM having been named as potential suitors. The chronic nature of such speculations has made the potential of a Rackspace acquisition a matter of when, not if, in the minds of many industry observers.