This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Rackspace Bluffing About Acquisition Offers?: StockTwits

NEW YORK (TheStreet) -- Tech giants were supposed to cannibalize Rackspace's (RAX - Get Report) business. But, according to the cloud hosting company, they may want to absorb it instead.

Rackspace revealed in a Thursday SEC filing that it hired investment bank Morgan Stanley (MS) to help weigh offers for its business, which stores data and manages software for enterprises on remote servers. Rackspace's products are more expensive than other cloud hosting companies, such as Google  (GOOG), but management insists that their customer service makes it worth the premium.

The SEC filing indicates that others think so too. "In recent months, Rackspace has been approached by multiple parties who have expressed interest in exploring a strategic relationship with Rackspace, ranging from partnership to acquisition," wrote Rackspace General Counsel Tiffany Lathe in the May 15 filing. "No decision has been made and there can be no assurance that the Board's review process will result in any partnership or transaction being entered into or consummated."

Shares rose more than 20% on the news. But investors on StockTwits.com doubted Rackspace would have any suitors.

$RAX why would I even pay a 20% premium to a very competitive commodity business, which I can build myself quickly? ? Mike (@scottsdalem) May. 16 at 12:00 PM

The cost of hosting data remotely continues to fall, pressuring Rackspace's margins and threatening to make its relatively expensive "managed hosting" business obsolete. Sentiment on the stock is 68% bearish, according to StockTwits' analytics.

$RAX Mgmt can say whatever they want about the managed and added service for prem. price. GOOG & AMZN are killing this co. This is commodity ? Mike (@scottsdalem) May. 16 at 11:56 AM

Indeed, some saw Rackspace's hiring of Morgan Stanley as evidence that management realizes it cannot be successful without a deep-pocketed buyer capable of pouring billions into a cloud infrastructure business.

When you are competing with the likes of Amazon (AMZN), Google and Microsoft (MSFT), it is easy to be outspent. So some investors bet against a lucrative buyout Friday.

$RAX Purchased June $35 puts ? Rudy Cortes (@CortesAnalysis) May. 16 at 02:17 PM

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
RAX $39.91 0.53%
AAPL $130.42 0.35%
FB $81.96 1.90%
GOOG $539.98 0.15%
TSLA $249.08 0.29%

Markets

DOW 18,077.63 +65.69 0.36%
S&P 500 2,114.12 +4.52 0.21%
NASDAQ 5,094.1160 +17.5920 0.35%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs