The word seems to be out that Rackspace's most likely suitor is none other than CenturyLink. Rackspace and its cloud/hosting business have been rather publicly on the table for the past month or two. Initial speculation seemed to focus on tech giants, yet I have always thought a telecommunications operator might make more sense. For what it's worth, I think CenturyLink could do well out of the deal.
Unlike its two larger ILEC brethren, CenturyLink is not blessed or burdened with a consumer wireless business. Verizon and AT&T love their wireless businesses, but it takes so much of their mojo it is harder to see them going after a Rackspace or anything else of similar magnitude outside the wireless business these days. CenturyLink on the other hand has been putting a substantial amount of focus on its cloud and data center business already, taking Savvis and other acquired businesses and transforming them into CenturyLink Technology Services.
Rackspace could fit well with those assets, giving it a more substantial footprint in the public and hybrid cloud infrastructure space. Some have thrown a bit of cold water on the idea with the comparison to Amazon, but I don't think CenturyLink would buy Rackspace to take on Amazon. Rather they would likely build on Rackspace's more recent focus on hybrid and private clouds. The public cloud and hosting pieces should perhaps be thought of similarly to IP transit for most network operators -- a necessary piece of a larger puzzle but not an end in and of itself.
The question is not whether CenturyLink could challenge Amazon at its own game, but whether it could take the Rackspace business and sell more to the enterprise customer base they are seeking to expand and deepen while utilizing the Savvis and other assets to improve the underlying cost structure. I think they probably could, although it would be a big task that would take years to work out.
On the other hand, Rackspace's 'fanatical support' could be hard to maintain inside a rather more traditional telecom customer service environment. But that sort of thing will always be a question when any entity built out of former pieces of Ma Bell delves into newer technologies.
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