CenturyLink, Inc. (CTL) Plans to Acquire Rackspace Hosting, Inc. (RAX) to Explore Cloud-Computing Possibilities

CenturyLink, Inc. (NYSE:CTL) is likely to enter the cloud-computing service industry by acquiring Rackspace Hosting, Inc. (NYSE:RAX). Rackspace Hosting, Inc. (NYSE:RAX) has a stock market value of $5.33 billion until last week.

The acquisition will help CenturyLink, Inc. (NYSE:CTL) to compete against other web service providers including Amazon.com, Inc. (NASDAQ:AMZN). CenturyLink, Inc. (NYSE:CTL) is not the only company looking to increase its service portfolio with more acquisitions, as the companies like Microsoft Corporation (NASDAQ:MSFT) and Google Inc. (NASDAQ:GOOGL) are looking for potential acquisition targets as well.

CenturyLink (CTL)

Donna M. Jaegers, DA Davidson & Co. analyst, said,

“Strategically, it would be a good acquisition.”

She agreed that the price would be high for acquisition considering the market value of Rackspace Hosting, Inc. (NYSE:RAX) and unless the hosting providers is ready for joint venture or accepting payments in stocks, the deal is less likely to reach final stages.

Rackspace Hosting, Inc. (NYSE:RAX) has lost nearly 50% share price since January 2014 and the company has receive multiple offers for acquisition this year. The company reported net revenue of $441 million for the second quarter 2014 with net income of $22 million. Rackspace Hosting, Inc. (NYSE:RAX) reported an increase of 17% in its sales ($1.53 billion) in 2013 out of which, cloud computing accounted for $415.2 million.

CenturyLink, Inc. (NYSE:CTL) will complete the second cloud-service based acquisition if the deal closes successful. Earlier, the company acquired Tier 3 Inc. in November last year and the company has a net market value of $23.6 billion. CenturyLink is expanding its web-based portfolio with a new data center in Toronto market last month with the capacity of holding up to 5 megawatts of IT load.

This article has been written by Prakash Pandey.


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