Rackspace Buys Two Startups Potential Hope For Own Acquisition

Rackspace Hosting the world’s leading hosting services provider, today unveiled its cloud hosting strategy which extends the company’s technology and service leadership to cloud hosting.

In support of its new cloud hosting strategy, the company announced it has agreed to acquire Slicehost and Jungle Disk. Rackspace’s cloud strategy is supported by three core offerings, all part of Mosso, Rackspace’s Cloud Hosting Division. The company’s existing Hosting Cloud and CloudFS storage offerings have been re-branded to reflect the company’s newly integrated approach. The San Antonio, Texas-based company will reportedly spend upwards of $18 million on its two acquisitions, with $11.5 million payable in cash and stock, and the potential for more in additional payouts of cash and stock based on certain performance criteria.

While on the surface the merger is small. Rackspace is trying to keep up with Amazon who last month launched its own content delivery network. Rackspace now trades with a market capitalization of just $600 million based upon today’s closing price. Although it is a bold statement to make this early in the game after going public, it is this authors opinion that these acquistions were strategically made to help Rackspace look more appealing to potential suitors. The acquisitions position Rackspace in the right direction to be acquired themselves.

Already distinguished by its award-winning Fanatical Support Rackspace is recognized as one of FORTUNE Magazine’s 100 Best companies to work for, ranking number 32 on the 2008 list, Rackspace presents tremendous value to a potential suitor. Whether Amazon, Google, Yahoo or Microsoft someone looking for value could find it here scooping up Rackspace for a song and at the same time add tremendous value to its own organization.

2 Comments on this Post

  1. Herb knows his stuff. Pay attention.

  2. Herb knows his stuff. Pay attention.


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