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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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