Reports: Rackspace Could Be Sold by End of Week

click to enlarge Remember those Harlem Shake videos? Yeah, Rackspace did one of those, too...  - via youtube
Remember those Harlem Shake videos? Yeah, Rackspace did one of those, too...
Multiple news reports Thursday afternoon made a Rackspace sale look imminent and temporarily halted trading of the San Antonio-based tech company. 

Citing anonymous sources familiar with the deal, the Wall Street Journal reported Thursday that Rackspace is in "advanced talks with one or more private-equity firms" for a sale, perhaps as soon as by the end of this week. As the Express-News reports, word of the sale caused Rackspace stock to shoot up 13 percent before trading of the company was stopped Thursday afternoon. A company spokesman told the daily that reports of the sale were just "rumors and speculation."  

It was just two years ago that Rackspace first publicly acknowledged the possibility of a sale, saying it had been approached by several parties looking for partnerships all the way to total buyouts. At the end of that process, however, company officials decided against a sale and instead promoted then-president Taylor Rhodes to CEO, turning Rackspace co-founder Graham Weston (who had been CEO and chairman) into a non-executive chairman. 

Rackspace has worked in recent years to shift its business model away from data-center hosting and more toward that of a cloud services company — the idea being that Rackspace should help support, rather than compete with, tech giants like Amazon and Microsoft in the cloud computing game. During the latest quarterly earnings call with investors, company officials highlighted the growth in Amazon and Microsoft customers signing up for Rackspace's cloud management service.

Still, as the Express-News noted at the time, some analysts have remained skeptical that Rackspace could ever really compete with larger and less expensive providers. Word of the sale comes just days before the company is slated to drop its second-quarter earnings report, which could show whether the company's cloud computing support services have really taken off. 

WSJ speculates that Rackspace's market value may have jumped from $3 to $4 billion just based on news of an impending sale.


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