Blue Harbour Reveals 6.4% Stake In Rackspace - Update

(RTTNews) - Investment firm Blue Harbour Holdings LLC on Monday disclosed a 6.4 percent stake in cloud service provider Rackspace Hosting Inc (RAX).

In a regulatory filing, Blue Harbor said it owns about 9.01 million shares of Rackspace, representing a stake of 6.4 percent, up from the 2.5 percent stake it disclosed at the end of June.

Blue Harbour said the investment represented an attractive opportunity and that it would engage in talks with Rackspace and potential strategic partners over the company's business, management, capital structure, board composition and strategic alternatives.

In July, Rackspace was reported to be in talks with a private equity firm to go private. The company earlier hired Morgan Stanley to explore strategic options and was approached for partnership and acquisitions.

Last Monday, Rackspace reported a marginal rise in second-quarter profit, helped by double-digit revenue growth, largely offset by higher operating expenses.

While Rackspace has managed to boost its revenue, investors are concerned about competition from companies that are creating their own cloud services.

Rackspace stock closed Monday at $31.82, up $0.61 or 1.95%, on a volume of 2 million shares on the NYSE. In after hours, the stock gained $0.95 or 2.99 at $32.77.