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Is Rackspace Buyout in the Cards for CenturyLink?

Telecommunication company, CenturyLink Inc. (CTL), is reportedly seeking to expand its cloud business with a prospective acquisition of Rackspace Hosting Inc. (RAX). Although no official announcement has been made, going by the market reports of late, the company is in talks with Rackspace and is also considering an internal review of its strategic acquisition plans.

Reportedly, the prospective buyout will bring additional Internet and cloud service business to CenturyLink,providing a competitive edge against big players likeAmazon.com Inc. (AMZN) in the Web-based platform. Going by market reports, Microsoft Corp. (MSFT) and Google Inc. are also contesting for business acquisitions as these companies are progressing toward owning and operating servers from simply renting space in the cloud.

CenturyLink expects the right infrastructure to meet the growing needs for cloud hosting and colocation services. Further, the company’s robust strong network capabilities, integrated hosting and network solutions will promote growth in the cloud business. CenturyLink is concentrating on expanding the business base of its subsidiary Savvis, which has contributed immensely in uplifting the performance level of the former through its cloud computing and managed hosting solutions for enterprises.

CenturyLink acquired Platform-as-a-Service (PaaS) provider – AppFog Inc. This acquired unit – which extends custom-made PaaS capabilities to software developers and public cloud services through www.appfog.com – will augment the product portfolio of Savvis. We view this acquisition to serve as a growth driver as AppFog's high-quality PaaS offerings along with Savvis' industry-leading infrastructure base will likely create a secure and reliable network for developing applications in the cloud.

The company has also acquired public cloud services provider, Tier 3, in order to boost its cloud developments and data hosting capabilities. CenturyLink believes Tier 3’s public multi-tenant cloud platform, coupled with its network and data centers’ footprint and managed services team, will contribute to growth going forward.

CenturyLink has a Zacks Rank #3 (Hold).
 
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Zacks Investment Research is characterized by a team of experts who are passionate about your investing success and is focused on sharing the same reliable investment research they would want for themselves.