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As Potential Suitors Come Knocking, Rackspace Hosting, Inc. (NYSE:RAX) Taps Morgan Stanley (NYSE:MS) To Evaluate Options

Boston, MA 05/16/2014 (wallstreetpr) – The $5 billion market capped web-hosting company Rackspace Hosting, Inc. (NYSE:RAX) has hired Morgan Stanley (NYSE:MS) to help it explore options as potential suitors come knocking. The company seeks to evaluation several strategic options for its future that include partnership or a sale.

The company recently said in a filing with the U.S. Securities Exchange Commission that it has been approached with parties seeking different strategic relationships that range from partnership to acquisition.

Rackspace Hosting, Inc. (NYSE:RAX) is becoming vulnerable to potential acquirers at a time when the tech industry is awash with deals. For example, Google Inc (NASDAQ:GOOG) recently sold its mobile phone business Motorola Mobility at a throwaway price after it failed to live up to expectations. Facebook Inc (NASDAQ:FB) also recently inked a $19 billion deal with WhatsApp. It is also rumored that iPhone maker Apple Inc (NASDAQ:AAPL) is on the verge of acquiring Beats.

The intense competition in the tech industry and the shift in user preference are cited as responsible for the wave of deals that are sweeping across the industry.

Cheap to get

Rackspace Hosting, Inc. (NYSE:RAX) looks like a cheap target currently. The company has lost almost half of its share value since 2013, and that makes it an easy target for potential acquirers. In addition to the company looking cheap for acquisition, it also faces intense competition in the web-hosting market. The company seems to be losing the battle to the bigger rivals Amazon.com, Inc (NASDAQ:AMZN) and Google Inc (NASDAQ:GOOG) that are using their big financial muscles to lock competitors out of business.

As such, analysts believe that a partnership or acquisition will be in order for Rackspace Hosting, Inc. (NYSE:RAX) and its shareholders.

No decision, no timeline

Rackspace Hosting, Inc. (NYSE:RAX) does not know how quickly it might get a deal done. It also does not know whether a partnership or sale is good for it, and the announced review will serve to answer that question.

The company also said that the review process does not necessary mean that a deal will be reached. For that matter, the company does not intend to speculate about when the review process will conclude and what the board might decide at the end of the day. The company also withheld the identities of the potential suitors that approached it for a strategic relationship as reported to SEC.

Shares of Rackspace Hosting, Inc. (NYSE:RAX) are down 6.29 percent since the beginning of the year.

Published by Chris Brown

About Me: I have a Phd in Economics Gender: Male Interests: Playing games like cricket, volleyball Favorite Music: hip hop, rock, jazz

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