For Sale: Rackspace. But who would buy it?

Sale clipart

Cisco, AT&T, Red Hat are among potential suitors

Rackspace has received multiple inquiries about strategic investments or a potential sale to another company, the New York Times has reported. To help the company evaluate its options, it has hired banking giant Morgan Stanley.

It's got Cloud Chronicles thinking: Who would be in the market to buy Rackspace?

+MORE CLOUD CHRONICLES: Red Hat vs. The Wall Street Journal and the battle for OpenStack clouds | Cisco is bouncing back, but can Chambers hold on? +

First some background on Rackspace: The company has its roots in managed hosting, but during the past half dozen years has broadened its focus to now cover cloud computing as well. Rackspace is synonymous with OpenStack, the open source cloud computing platform after it started the initiative with NASA four years ago.

So, if Racskpace gets sold (and it's not definite that will actually happen by the way), then whoever buys the company is getting a couple things.

1) Lots of data centers, servers, capacity and, of course, fanatical support. The company has not been willing to play the race to the bottom game on cloud pricing and instead has focused on higher service-oriented approach. Whoever is buying Rackspace is buying a lot of data centers though. 2) OpenStack. Whoever buys Rackspace is buying into the OpenStack world. Rackspace has bet its public cloud farm on OpenStack, and whatever happens to Rackspace in the future will likely revolve around OpenStack.

As Cloud Chronicles looks into its crystal ball, here are some potential new owners for Rackspace. (Note: These are all based on speculation and these companies have made no official statements expressing an interest in buying Rackspace):

The Natural Fits

-Cisco

This makes a lot of sense. Cisco recently announced a major initiative to focus more on cloud computing and the company already has a strong hold in the private cloud side. Its UCS converged infrastructure serves as the basis for many private clouds. But, Cisco doesn't really have a strong public cloud footprint. Rackspace would give them that immediately.  To make the deal even sweeter, Cisco is big on OpenStack, with its cloud CTO Lew Moorman serving as the vice chair of the OpenStack Foundation. And Cisco has the money to do it.

-AT&T

Three years ago Verizon, an AT&T competitor, made a big splash and got into the cloud market in a big way by buying Terremark. CenturyLink bought Savvis before that. Is it time for AT&T to buy a cloud provider now too? These marriages between telecos and public cloud providers make sense: The teleco provides the network and the cloud providers are the end-point. And oh look at that, AT&T is a corporate sponsor of OpenStack.  

The Long shots

-Red Hat

Like Cisco, Red Hat has a strong private cloud play and is all-in with OpenStack. It too could benefit from a public cloud. This is not as natural of a fit. Red Hat can make plenty of money by selling its Red Hat Enterprise Linux licenses on multiple public cloud providers, so I can't see what Red Hat would want to limit itself to primary distributing RHEL through Rackspace's public cloud.

-Facebook

Hey, if they bought WhatsApp for $19 billion, getting Racskapce for a fraction of that could be a steal. Facebook is building new data centers left and right and Rackspace is a data center company. It's not a natural fit, but Facebook likes open source and has the money to do just about anything it wants.

Here's who it will not be

IBM, HP or Dell

IBM would have been a solid choice two years ago, but then it bought SoftLayer, which takes them out of the picture. Dell has decided to focus on private clouds and consulting while having a network of public cloud providers. I doubt Dell would change its cloud strategy yet again, but stranger things have happened. HP just rebranded its cloud efforts around the Helion brand. The company already has an impressive data center footprint, so buying Rackspace seems like a stretch.

Or maybe nobody

Maybe Rackspace will not get sold and instead involve itself in some strategy partnership with another company. Or, as Tim Crawford suggested on Twitter, maybe Rackspace will pull a Dell move and take itself private. Either way, Rackspace is facing pressure. Its stock is tumbling (it's has halved in value in less than a year), and Amazon Web Services, Google, Microsoft, IBM, Verizon and VMware aren't slowing down. Something's going to happen. Rackspace customers needn't worry too much, their service isn't going away. But, depending on what happens there could be more strategic opportunities for Rackspace customers very soon.

Photo credit: Yuriy Panyukov. Senior Writer Brandon Butler covers cloud computing for Network World and NetworkWorld.com. He can be reached at BButler@nww.com and found on Twitter at @BButlerNWW.

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