Amazon in talks to invest in cloud services company Rackspace
Amazon is in preliminary talks to invest in US-based cloud services provider, Rackspace Technology.
According to Reuters the deal would involve Amazon acquiring a minority stake in Rackspace.
Rackspace helps companies migrate their data to Amazon Web Services (AWS), and the investment would strengthen the ties between the two companies. Rackspace also migrates companies to Google Cloud, Microsoft Corp’s Azure and VMware.
“There is no certainty that Amazon and Rackspace, which is majority-owned by private equity firm Apollo Global Management, will agree to the deal,” says Reuters sources.
“If there is one, it could take one to two months to negotiate it,” adds the source, asking anonymity because the matter is confidential.
Rackspace and Apollo declined to comment, while Amazon did not respond to a request for comment.
Rackspace shares soared as much as 17% on the news.
Read more: HSBC signs multi-year cloud deal with AWS
Rackspace leases server space and helps corporations store and access data in the cloud. It was acquired by Apollo in a $4.3 billion leveraged buyout in 2016 and was listed in the stock market earlier this month.
The San Antonio, Texas-based company has market capitalisation of more than $3 billion, almost as much as its debt pile.
AWS is thriving on higher demand from companies switching to virtual offices amid the coronavirus outbreak.
Its revenue from AWS rose nearly 29% in the second quarter to $10.81 billion.
If Rackspace bring in Amazon as an investor, it would be the second Apollo-owned company to secure such a deal with a major technology company this year.
Earlier this month, Global Payments and AWS signed a multi-year collaboration agreement. It also signed a multi-year global agreement with HSBC in July.