Report: IBM Considers Rackspace Acquisition

Move over, SoftLayer: IBM Corp. may have bigger fish to fry.

According to published reports, Big Blue, which last week was said to be in the running along with EMC Corp. for a potential buyout of the cloud services company, could also have its eye on Rackspace Hosting. Inc.

Quoting an anonymous former IBM executive with knowledge of the matter, GigaOm on Sunday reported that IBM over the past month has taken a serious look at fellow OpenStack Foundation member Rackspace.

IBM remains interested in SoftLayer Technologies Inc. as well, the source said. EMC, however, is rumored to be growing less interested in the Dallas-based cloud applications hosting specialist. Insiders have kicked around a suggested purchase price of $2 billion for SoftLayer.

Rackspace, meanwhile, with a market cap of $7.2 billion and revenues of $1.3 billion last year, would presumably cost much more. The buyout rumors pushed Rackspace shares up 4.5 percent $53.60 on Monday.

Both EMC and IBM are said to covet entree into the white-hot cloud hosting market, though neither company is anxious to build out their own, homegrown offerings.

“IBM does not want to fund its own development because past history shows we’re not very good at it,” the source told GigaOm. “IBM’s become a holding company of sorts, buying assets, integrating them and reselling them as an IBM brand.”

EMC is at least tangentially connected to such services already through the launch last week of a new public cloud service by its subsidiary, VMware Inc. VMware’s isn’t part of the OpenStack cloud standards initiative, however, relying instead on its proprietary vCloud Suite technology. EMC and VMware also recently unveiled details of a joint venture in cloud computing, dubbed Pivotal, to be headed by former VMware CEO Paul Maritz.

The sale of either SoftLayer or Rackspace to a large IT vendor and channel stalwart could have broad implications for the channel.  And the persistent M&A rumors surrounding both shows how important having hosted infrastructure is to the growth and development of the technology market and could demonstrate how disruptive cloud consolidation could be to the channel and general market.

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