Unearthing Rackspace Hosting's Suitors: Clues in the OpenStack?

News of Rackspace hiring Morgan Stanley to explore options sent the stock skyrocketing. What its bet on OpenStack says about potential suitors.

May 20, 2014 at 5:00PM

Does a bigger bet on OpenStack mean IBM (NYSE:IBM) might be among the several making overtures to Rackspace Hosting (NYSE:RAX)? Fool contributor Tim Beyers addresses this question and more in the following video.

According to a report from IDG (via Computerworld), Big Blue has added its OpenStack distribution to the company's online marketplace of products and services. The goal? Move more software to the cloud and convince customers to host their apps in a hybrid environment managed by IBM and its SoftLayer platform, acquired last year for a reported $1.2 billion.

The shift also comes at an interesting time. A recent survey of the OpenStack community found some 506 deployments across 512 companies. Of those, 34% were commissioned inside companies with 1,000 or more employees and 209 were in production. The message? OpenStack is growing into a legitimate open source business platform.

Meanwhile, in a recent 8-K filing, OpenStack evangelist Rackspace said it had hired banker Morgan Stanley to explore "options" for handling overtures from potential suitors. IBM could be among them, despite its earlier bet on SoftLayer.

Why? Tim says there's a natural synergy between Rackspace's stated strategy for serving complex hybrid cloud environments and IBM's focus on winning large, long-term services and support deals. Together, the two might build an entire consulting practice around open source cloud computing.

Now it's your turn to weigh in. Do you believe IBM's bigger bet on OpenStack signals interest in Rackspace? Why or why not? Please watch the video to get the full story and then leave a comment to let us know your take, including whether you would buy, sell, or short Rackspace Hosting stock at current prices.

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Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of International Business Machines and Rackspace Hosting at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.

The Motley Fool recommends Rackspace Hosting. The Motley Fool owns shares of International Business Machines. 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 has a disclosure policy.

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