Rackspace Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Web hosting and cloud-computing vendor Rackspace Hosting (NYSE: RAX  ) popped more than 10% in early trading today.

So What: There are twin engines behind this move: speculation that Dell (Nasdaq: DELL  ) might choose to buy Rackspace to expand its cloud-computing acumen, and a halo effect around strong results from rival Terremark Worldwide (Nasdaq: TMRK  ) . Rackspace has now returned 43% over the last three months to its shareholders, or 52% in six months.

Now What: You'll notice that neither the takeover rumor nor Terremark's spectacular quarter speak directly to Rackspace's own business. The company is set to report earnings next Monday, and it has a history of delivering exactly what analysts are looking for. As for the takeover chatter, Rackspace is a fabulous business, with Dell as a major equipment supplier. Given the synergies the two companies could jointly exploit, it would be silly to write off the possibility.

Interested in more info on Rackspace? Add it to your watchlist.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. Rackspace Hosting is a Motley Fool Rule Breakers pick. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool is investors writing for investors.


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