The sale of Rackspace to a private equity firm is reportedly in advanced talks.
Two years after the company sought a buyout in order to better deal with competition in the cloud market the company is said to be in advanced talked with one or more private equity firms, according to the Wall Street Journal.
Sources said that a deal could be reached this week for the company that has a market valuation of around $3bn, but could be valued at as much as $4bn.
Rackspace, which provides cloud services but has largely stepped away from the public cloud into a more focused managed cloud services offering, shifted its model due to the challenge of competing with the likes of Amazon Web Services and Microsoft’s Azure cloud.
The company isn’t the only one to have stepped away from the public cloud as HPE also ended its Helion public cloud offering earlier in the year.
The change of strategy has contributed in a significant valuation drop for the company which was previously trading shares at around $80, they now trade at $31.50 following an increase of 30% in afterhours trading.
Rackspace hired bankers in 2014 in order to evaluate the level of interest in an acquisition.
As part of its change of strategy the company has partnered with formal rivals like AWS in order to make it easier for customers to move computing operating from their own facilities to the AWS cloud, a similar partnership is also in place with Microsoft Azure called Fanatical Support.
So far the reaction to this from customers has been largely positive as customers look to in essence outsource the management of their public or private cloud to the company.
Last year the company reported that cash from operations stood at $156m in the first quarter, while last year it has a net income of $122.4m up 14% and a revenue of $2bn up 12%.
Second quarter financial results are expected to be reported on Monday 8th of August.
A deal for Rackspace could be significant for the cloud market but would likely be shy of the $9.3bn that Oracle agreed to pay for NetSuite.
