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September 8, 2014

Is CenturyLink looking to buy Rackspace? 5 things you need to know

Acquisition would bolster cloud services portfolio for CenturyLink.

By Ben Sullivan

CenturyLink is considering the acquisition of Rackspace, a move which will bolster its cloud computing services.

The news comes from people familiar with the matter who spoke to Bloomberg.

A deal between CenturyLink, a US telco, and cloud vendor Rackspace could help it compete with other web services such as Amazon, Microsoft and Google. Centurylink already has a significant data centre business in the form of Centurylink Technology Services (CTS). CTS is the rebranding of Savvis, the data centre operator bought by Centurylink for $2.5bn back in April 2011.

However, the sources quoted on the latest speculation were not too hopeful on a deal, saying that it may not actually be reached.

Currently Rackspace’s market capitalisation is around $5.33 billion. Rackspace stock’s all-time high was $79 in last year, but hit a recent low on September 3 with $35.72, a 54% fall from January 2013.


New UK data centre

Construction is well underway for a data centre in Rackspace’s new market, Europe. Located in Crawley, UK, the 3,600 square metre data centre is being co-developed with Digital Realty.

The site sits across a 15 acre campus and will eventually comprise of four data suites with a total 10MW capacity. The initial outlay, providing 6MW across two data suites, is due to be delivered in the first half of 2015.

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The new data centre has been designed specifically for Rackspace to maximise operational efficiency as well as Open Compute compatibility and scalability.

CEO resignation

CEO of seven years Lanham Napier, who was with Rackspace since 2006, left the role in February 2014. The announcement was unexpected, and Rackspace quickly moved to usher in Graham Weston, Rackspace co-founder and executive chairman of the board, up to the CEO position. Napier’s resignation came amidst falling shares and increased competition from competitive cloud players such as AWS and the move from traditional vendors such as IBM moving into the cloud with its 2013 $2.2bn Softlayer acquisition.

Struggling for profit?

In August, Rackspace announced varied second quarter earnings. Revenue was higher than expected, standing at $441 million, which is a 17% jump from the same time 2013. However, net income stood at $22m, a 12% fall from last year’s Q2.

Locking down a strategic position in the cloud market

Rackspace announced a new managed service model for delivering public cloud services in July that claims to aid businesses and developers in designing, managing, scaling and growing their cloud operations.

The managed cloud firm has rolled two managed service levels: Managed Infrastructure and Managed Operations. Both service levels feature a ower total cost than companies managing cloud operations on their own. These platforms help the company distinguish itself from other public cloud vendors like AWS who don’t offer such levels of management.

OpenStack

Rackspace is one of the cofounders of OpenStack, the open-source operating system for cloud. In its earlier years, RackSpace was known for being the top public cloud choice for using OpenStack cloud, with a later shift to promoting private clouds which use OpenStack.

This year, HP announced that is plans to invest more the $1bn into the paltform over the next two years.

 

 

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