Rackspace once again in acquisition line of fire, valued at $4B

Ethernet cables in on premise equipment

Rumors swirling round the possible sale of Rackspace Hosting to Apollo Global Management, a private equity firm, have investors driving the cloud provider’s stock upward but employees fretting over the future of the company.

Rackspace’s value jumped from about $3 billion to a potential $4 billion when The Wall Street Journal reported on the rumor that the company was in talks with Apollo. While an encouraging jump for investors, it’s still well below the managed cloud provider’s January 2013 market high of almost $80 per share -- a peak that didn’t last long, as it value slumped downward from February 2013 forward after disappointing earnings results. Pricing pressure in the increasingly competitive cloud services market were largely to blame for Rackspace’s struggles, but the company stayed alive by maintaining its niche as a specialist managed services provider offering “fanatical” business support, according to a 2015 San Antonio Express-News article.

It’s not the first time that a possible sale of the hosting company has been in the works; Rackspace has looked at taking the company private for at least two years, and entertained offers in mid-2014 from several companies including CenturyLink. However, a purchase price couldn’t be agreed upon at the time.

What would happen to Rackspace, one of the early managed service providers in the industry, isn’t known. That has employees and city officials in Windcrest, Texas, where Rackspace headquarters are located, on edge. About 5,000 of the company’s 5,900 tech workers are based there, and their salaries have helped revitalize the San Antonio-area community.

“It would just be a shame for so many who work there” if the company were to relocate or close, said Windcrest resident Yolanda Mesa in a KSAT article about the potential sale.

Rackspace shares remained steady in midday Monday trading on the New York Stock Exchange at around $29.25, stabilizing from their Friday morning peak of about $31.

 For more:
- see this WSJ article
- see this Investopedia article
- see this KSAT article

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