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Rackspace continues buying spree to boost services

E-mail service Mailgun is Rackspace's seventh acquisition in five years, and third this year alone

By , Network World
August 30, 2012 11:10 AM ET

Network World - Mergers and acquisitions are a steady source of churn in the technology industry and for cloud-service provider Rackspace, the company's M&A strategy has allowed it to expand into new areas of service, and beef up its existing offerings.

Rackspace has kept up a steady stream of M&A activity, including this week purchasing its seventh company in five years and its third this year alone. The latest addition is Mailgun, a transactional email service targeted at developers and Rackspace Senior Vice President of Corporate Development Pat Matthews says it will not be the last acquisition for the company.

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Compared to other tech companies, Rackspace has not been overly aggressive in M&A activity, says Pat Walravens, an analyst at financial advisory JMP Securities who tracks Rackspace. Google, for example is famous for gobbling up companies. Compared to other major cloud-computing companies though, Rackspace has been fairly active. Its biggest competitor, Amazon Web Services, for example, has not made any major acquisitions recently, he noted.

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Mailgun, Rackspace's latest buy, allows developers to install an e-mail notification service in their application that alerts users when a certain trigger happens. Think of it as your airline sending you an automatic reminder that your flight is coming up tomorrow. It's just the latest in a string of acquisitions the company has made not just this year, but over the past half-decade.

Perhaps the most significant purchase came in October 2008 when Rackspace purchased Slicehost, marking Rackspace's foray into the cloud computing area, branching out from its traditional managed services practice. Slicehost code was the basis for the company's original cloud technology, which it is now migrating away from in favor of running its system on OpenStack.

Other acquisitions have included:

• June, 2007:, an e-mail inbox service

• October 2008: JungleDisk, a data storage and backup service

• December 2010: Cloudkick, cloud monitoring technology

• February 2012: Anso Labs, creators of Nova, the OpenStack compute project for building private clouds

• February 2012: SharePoint911, Microsoft SharePoint Consultancy

• August 2012: Mailgun, e-mail notification service for developers

Matthews, the Rackspace development officer, says the company looks for three major things when deciding to purchase a company: solid technology, entrepreneurial or engineering talent, and new market opportunities or expanded services. And Rackspace is on the lookout for more companies to buy, he notes. Particular areas of interest for future acquisitions include database management, security and cloud storage, he says.

Lydia Leong, a Gartner cloud analyst says Rackspace's M&A moves come down to a simple strategy: Rackspace wants to beef up its offerings for customers in as many areas as possible. Its recent acquisitions - SharePoint and Mailgun - add services on top of its current offerings that appeal to the enterprise market, building up an "API ecosystem," she says to enhance its cloud offerings.

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