Reports: Acquisition Of Cloud Hosting Provider Rackspace Is Imminent

While it's not the first time reports have surfaced saying Rackspace was going to be acquired, new reports have emerged suggesting the cloud hosting provider could be under new ownership by the end of the day Friday.

The Wall Street Journal first reported Thursday that a deal with a private equity firm was imminent. Friday, a Reuters story said Apollo Global Management was working on a deal with the San Antonio-based company that could be worth more than $3.5 billion.

Rackspace shares began trading up 14 percent on Friday.

[Related: Rackspace Is Betting On The Wisdom Of 'Co-Opetition']

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Jeff Chandler, president of American Technology Services, based in Fairfax, Va., told CRN that his company has shifted away most of the business it had previously done with Rackspace, but not all of it.

"We have some customers who really believe in them, and it is true they provide a terrific offering," Chandler said of Rackspace. "I’m just not sure it will ever be more than a niche player."

Rackspace faces some daunting challenges, Chandler said, and it shouldn't be a surprise that the company is looking to bring in private equity, regroup or restructure.

"The rumors last time were about a telecom provider acquiring them, so this is possibly more of just rumors. But I do think they really need to figure out how to stay relevant in the market," Chandler told CRN.

In May 2014, Rackspace informed the Securities and Exchange Commission that it had hired Morgan Stanley to formally explore a merger or acquisition. That September, Bloomberg News reported CenturyLink was looking to buy the company.

Speculation about potential suitors fizzled after Rackspace removed itself from the market, not content with any of the offers it had fielded.

Mat Elis, CEO of Cloudability, a Portland, Ore.-based software vendor that develops financial management tools for monitoring and analyzing cloud computing expenses, told CRN that given the negative reception in public markets to Rackspace's quarterly subscriber growth of roughly 20 percent, a private equity deal is probably a good idea for the company's shareholders.

Elis said he had previously speculated that Microsoft or Red Hat would ultimately buy the company, based on a series of executives from both companies who had gone to work there.

In December 2014, Apollo Global Management announced a deal to acquire Presidio, a large IT solution provider.