Tags: Reuters Sources CenturyLink Wants to Buy Rackspace for Cloud Services

Reuters Sources: CenturyLink Wants to Buy Rackspace for Cloud Services

Sunday, 07 Sep 2014 04:15 PM

CenturyLink Inc., the Louisiana-based landline phone service provider, is seeking to acquire Rackspace Hosting Inc. to further expand into cloud-computing services, according to people familiar with the situation.

CenturyLink has discussed the possibility with San Antonio-based Rackspace, which last month said it is still conducting an internal review of its strategic options, said the people, who asked not to be named talking about private information. One of the people said a deal may not be reached for the company, which currently has a stock-market valuation of $5.33 billion.

The deal would add more Internet and cloud services to Monroe, Louisiana-based CenturyLink’s roster of phone and data communications packages, helping it better compete against Amazon.com Inc. in Web-based services. Microsoft Corp. and Google Inc. are also vying for business as companies transition from owning and operating servers to renting space in the cloud.

Christina Weaver, a spokeswoman for Rackspace, declined to comment, citing company policy. Kelly Sullivan, an outside spokeswoman for CenturyLink, also declined to comment.

For Rackspace, the deal would cap a strategic review that started in May after years of takeover speculation. Rackspace hired Morgan Stanley earlier this year to seek strategic options and explore ways to expand the business after the company said it had been approached by multiple groups interested in a partnership or acquisition.

Rackspace’s shares have fallen about 53 percent from a record closing price of $79.24 in January 2013. Still, the stock, which closed at $37.24 on Friday, has tripled since the company’s initial public offering in 2008.

Cloud Services

Like Amazon and Google, Rackspace uses servers and software to help companies offload portions of their computing and storage work. Moving to cloud services has been a popular trend among companies looking to save on the cost of buying equipment and operating their own data centers.

Rackspace’s sales climbed 17 percent in 2013 to $1.53 billion, with $415.2 million coming from cloud computing. CenturyLink’s revenue declined 1.5 percent to $18.1 billion last year.

For CenturyLink, this would be the second acquisition of a cloud-computing company in the past year. In November, CenturyLink bought Tier 3 Inc. for an undisclosed sum.

CenturyLink’s largest acquisition was the $22 billion takeover of Denver-based regional phone company Qwest Communications International Inc., which was completed in 2011. As of Sept. 5, CenturyLink had a total market value of $23.6 billion.

Rackspace’s co-founder and chairman, Graham Weston, was called in to take over as interim chief executive officer in February after the retirement of Lanham Napier, who was CEO for eight years. When Napier left, Rackspace hired a search firm to find a long-term replacement, though the company gave no specific timeline for the move. Weston had been CEO from 1999 until 2006, when Napier was named as his successor.

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CenturyLink Inc., the Louisiana-based landline phone service provider, is seeking to acquire Rackspace Hosting Inc. to further expand into cloud-computing services, people familiar with the situation told Reuters on Sunday.
Reuters Sources CenturyLink Wants to Buy Rackspace for Cloud Services
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2014-15-07
Sunday, 07 Sep 2014 04:15 PM
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