Rackspace Jumps Off the Table

September 17th, 2014 by · 1 Comment

One of the bits of summer speculation that seemed destined to happen isn’t going to, at least for now. Rackspace yesterday called off its review of strategic alternatives, named Taylor Rhodes as its CEO, and plotted an independent course.

The market, which was looking for a nice juicy M&A in the short term from the tech or telecom worlds, didn’t take it very well, and the stock has dived some 18% in after hours trading. CenturyLink had been the most recent rumored suitor, after a variety of others came and went. And I still find the prospect of a CenturyLink/Rackspace combination to be an interesting one.  But in the end, the prospect of buying into the public and hybrid cloud space to take on the likes of Amazon apparently wasn’t quite enticing enough to justify the price.

Of course, Rackspace might still find its white knight later on, but for now they plan to go it alone. The strategic issue they faced was of course scale, and the fact that without deeper pockets they can’t do what their bigger brethren can do. But of course in tech it’s effectiveness and agility that really matter, and that’s what Rackspace once had back in the days before the cloud.

Maybe they still do, but they’ll have to prove it to the market again. The company says its focus will be on managed cloud services, as it looks to move up the value chain from the more commoditized pieces of infrastructure to providing expertise in the tools and applications that are run on top of it.

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Categories: Cloud Computing · Mergers and Acquisitions

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