(Adds comments from company spokesman, analysts; updates
By Supantha Mukherjee
July 2 Cloud service provider Rackspace Hosting
Inc is considering taking itself private and is in talks
with a private equity firm to fund the deal, technology blog
TechCrunch reported on Wednesday, citing a source.
Rackspace, which put itself on the block earlier this year,
may make an announcement by the end of this week, TechCrunch
Rackspace's shares rose as much as 8.5 percent to $36.62 on
Wednesday, valuing the company at about $5.2 billion.
Wells Fargo Securities analyst Gray Powell said Rackspace
could seriously be considering a move to go private, a move
supported by the strength of its balance sheet.
"However, we think it is more likely that the company is
trying to put pressure on potential buyers," Powell wrote in a
note to clients.
Rackspace has received at least three acquisition bids,
including those from Hewlett-Packard Co and IBM,
the tech blog reported, citing a source within the company.
The Hewlett-Packard bid was for up to $43 per share, the
tech blog reported. That offer values Rackspace at more than $6
Rackspace spokesman Brandon Brunson said the company does
not comment on rumors and speculation.
Rackspace leases server space and helps corporations store
and access data in the cloud.
The company said in a regulatory filing in May that it had
been approached by multiple parties and had hired Morgan Stanley
to help it in the process.
Cowen and Co analysts, in a note dated June 30, said there
was a small chance of a take-private transaction, adding that
potential buyers could also include telecom provider CenturyLink
Rackspace has faced stiff competition from newer startups as
well as established players in the cloud computing business,
such as Amazon.com Inc and Google Inc, which
have slashed prices recently.
While Amazon and Google do not disclose the number of
servers they operate, analysts have estimated that their server
count is much higher than Rackspace's 106,000.
"Given the competitive uncertainties in cloud and hosting,
it would certainly be a bold move by management and financial
sponsors to take the company private," RBC Capital Markets
analyst Jonathan Atkin told Reuters.
Concerns among investors about Rackspace's ability to
compete with its larger rivals have pushed down its shares to
mid-thirties from a high of $81 last year. It touched four-year
low of $26.18 in early May.
The stock was up 5.6 percent at $35.66 Wednesday morning on
the New York Stock Exchange.
(Additional reporting by Ankush Sharma and Lehar Maan in
Bangalore; Editing by Saumyadeb Chakrabarty)