Speculation about public cloud player taking minority stake gives multicloud MSP boost
Two weeks after becoming a public company again, Rackspace Technology is getting a boost following a report this week that Amazon Web Services (AWS) is considering investing in the cloud service provider.
The Lowdown: Rackspace’s IPO Aug. 5 was a mixed bag, with the San Antonio, Texas-based cloud MSP raising more than $704 million but seeing its stock price drop about 20% from the initial offering at $21. Following the report in Reuters about AWS’ possible investment, Rackspace saw its share price jump more than 15%, according to CNBC.
The Details: Citing unnamed sources, Reuters reported this week that AWS, the largest player in the fast-growing global public cloud services market, was in preliminary talks to invest in Rackspace, which over the past several years has pivoted from its roots as a colocation and managed hosted services company to become a multicloud MSP.
The deal would include AWS gaining a minority stake in Rackspace, which was bought four years ago by private equity firm Apollo Management for $4.3 billion and taken private. A key part of Rackspace’s transition has been partnering with the same cloud service providers – not only AWS but also Microsoft Azure, Google Cloud, VMware, and others – that it once competed with.
Reuters reported that it’s uncertain whether the two sides will agree on a deal, which could take a month or two to work out. An investment by AWS would tie Rackspace even more closely with the public cloud player, which Synergy Research Group said holds about 33% of the market.
Rackspace, Apollo, and AWS have not commented on the report.
The Impact: Rackspace’s transformation has evolved over the past few years and has accelerated since Kevin Jones took over as CEO last year. The company in June said it was shifting its strategic focus to the multicloud space, an announcement that included a name change and new solutions in four areas – Cloud Optimization, Cloud Security, Cloud Native Enablement, and Data Modernization. The enhanced strategy comes at a time when the ongoing COVID-19 pandemic has accelerated organizations’ plans to migrate their workloads and data to the public cloud, a trend reflected in a report in April from Flexera.
Background: According to Synergy Research analysts, the global cloud infrastructure services market in the second quarter blew past the $30 billion mark, a year-to-year increase of more than $7.5 billion. AWS remained on top of the market, with Azure garnering 18% of the space and Google Cloud coming in with 9%. Other companies listed included IBM, Oracle, Salesforce, and Chinese companies Baidu, Alibaba, and Tencent.