Rackspace ends rumours of partnership and acquisition

Rackspace remains independent and appoints Taylor Rhodes as chief executive to drive its managed cloud strategy

Managed cloud provider Rackspace, which had been the subject of a potential partnership or acquisition, has decided to remain independent. The company has also appointed Taylor Rhodes as its chief executive to drive its managed cloud strategy.

It was rumoured that heavyweights, including HP and CenturyLink, were keen to acquire Rackspace. Earlier this week, HP acquired Eucalyptus, an open-source software specialist that helps build private and hybrid enterprise clouds.

In May this year, Rackspace revealed in its filings with the Securities and Exchange Commission (SEC) that it has appointed Morgan Stanley and Wilson Sonsini Goodrich & Rosati to facilitate a review of the company and evaluate its acquisition alternatives.

“After a comprehensive review, the board decided to terminate M&A discussions,” Rackspace said.

“We talked to a diverse group of interested parties and entertained different proposals. None of these proposals were deemed to have as much value as the expected value of our standalone plan,” said Graham Weston, Rackspace's co-founder and chairman.

Based on the company’s revenue growth and its potential trajectory for the coming year, the board concluded the company should remain independent to capitalise on the growing market opportunity for managed cloud services.

Months after its SEC filings, Rackspace relaunched its public cloud services as a managed cloud in a bid to differentiate its more expensive services from Amazon, Microsoft and Google. 

“Cloud as a commodity, or a raw infrastructure, is not suitable for everyone,” Rackspace CTO John Engates told Computer Weekly at that time. Not all enterprises have the skills and expertise to deploy and manage their cloud infrastructures.

Under its managed cloud umbrella, Rackspace said it will provide more transparent SLAs, support and charging models.

“Competition in the public cloud market has accelerated in the past year,” said Melanie Posey, research vice-president at IDC. “But Rackspace’s managed cloud approach provides an opportunity for significant differentiation from the rest of the pack.”

Rackspace trails AWS, Microsoft, CenturyLink and CSC for the IaaS market, according to Gartner’s latest Magic Quadrant report, which positions the company in the challengers quadrant – a slip after being named a leader in 2013.

But Gartner placed Rackspace in the leader quadrant in the managed cloud category.

Rackspace also announced the appointment of Rhodes as its CEO with immediate effect.

“As a seven-year leader of Rackspace, Taylor was instrumental in the development and execution of Rackspace’s managed cloud strategy that is now delivering strong results,” said Weston. “We are confident that under his leadership, and through the execution of our strategy, Rackspace is well positioned to lead in the large and growing managed cloud category.” 

Rackspace is targeting businesses and developers that trust it to manage not only their cloud infrastructure but also the many complex tools and applications that run on top of that infrastructure, including the latest databases and e-commerce platforms. By delivering expertise in these highly specialised areas, Rackspace enables customers to stay fast and focus on their core business. 

Rackspace’s posted more than $20m of new revenue for the second quarter of 2014 alone.

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