CenturyLink is reportedly looking to acquire Rackspace

In an odd turn of events, major web hosting company Rackspace is allegedly in negotiations to sell itself to Louisiana-based telecommunications firm CenturyLink. The news, first reported by Bloomberg earlier, wouldn’t be a complete shock if true. Rackspace first notified shareholders that it was interested in selling the company back in may, which actually had a negative effect on its stock price.

CenturyLink Inc., the Louisiana-based landline phone service provider, is seeking to acquire Rackspace Hosting Inc. to further expand into cloud-computing services, according to people familiar with the situation. CenturyLink has discussed the idea with San Antonio-based Rackspace, which last month said it is still conducting an internal review of its strategic options, according to the people, who asked not to be identified talking about private information. One person said a deal may not be reached for the company, which had a stock-market valuation of $5.33 billion at the end of last week. The deal would add more Internet and cloud services to CenturyLink’s roster of phone and data communications packages, helping it better compete against Amazon.com Inc. in Web-based services. Microsoft Corp. and Google Inc. are also vying for business as companies transition from owning and operating servers to renting space in the cloud.