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Cloud Services

Rethinking Rackspace as a Cloud Partner

When Rackspace was rumored to be an acquisition target, the cloud provider's stock soared. With yesterday's news that an acquisition isn't happening, Wall Street reacted predictably, knocking 18% off the stock price.

But it's not just investors who are disappointed that this cloud services pioneer isn't teaming up with an networking/cloud provider such as CenturyLink Inc. (NYSE: CTL). I think this is a missed opportunity. (See Rackspace Could Help CenturyLink's Cloud, NFV Efforts – Analyst.)

In the very competitive cloud services world, Rackspace has carved out its own niche as a managed cloud provider, known for its exceptional customer service and the way it helps companies move to the cloud. One of the reasons the company backed off its M&A plans was its second-quarter growth, its best to date, with $20 million in new revenue.

Rackspace is also known for its internal smarts, particularly its deep base of OpenStack expertise, which is going to become more important as the telecom industry accepts an open-source approach to its next generation of networking. (See Is Open Source the New De Facto Standard?.)

The combination of those things made Rackspace an attractive partner for a telecom cloud provider looking to increase its scale in the cloud market -- and they all are.

On its own, Rackspace will continue to battle in a cloud market increasingly dominated by giants such as Amazon Web Services Inc. , IBM Corp. (NYSE: IBM) and Microsoft Corp. (Nasdaq: MSFT), and increasingly vulnerable to price competition, which isn't the Rackspace sweet spot. Certainly the cloud company's newly reorganized management team knows the challenge ahead. (See Rackspace Could Help CenturyLink's Cloud, NFV Efforts – Analyst.)

Is there space in the market for a Rackspace? Oh, sure. But the more powerful play would have been the combination of Rackspace and telecom cloud looking to expand beyond its network footprint.

— Carol Wilson, Editor-at-Large, Light Reading

Mitch Wagner 9/18/2014 | 5:37:11 PM
Price differentiation Amazon has got a lock on the low-price cloud market. Competitors need to find other ways to differentiate themselves. 
thebulk 9/17/2014 | 3:26:12 PM
Re: Yes please I suspect that you are correct. Though that doesn't stop me from wanting to see it. :-)
cnwedit 9/17/2014 | 2:48:30 PM
Re: Yes please I can only assume that Rackspace wasn't getting the offers it wanted or expected. And now I would assume the new management wants to make its mark. 

So I doubt we'll see any movement in the near term.
thebulk 9/17/2014 | 2:37:09 PM
Yes please Seeing Rackspace team up with a telecom to offer cloud services would be amazing and something I have been waiting to see for a very long time. Picking the right partner could really be a big game changer in that space. But who knows what the future holds. 
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