Rackspace Sale Speeds Pivot to Cloud Support

Mitch Wagner

Rackspace is going private in a $4.3 billion deal with a group of investors led by Apollo Global Management. The transition will give the company breathing room to focus on a long-term strategy providing services to help enterprises launch IT infrastructures on multiple clouds and managed services.

By being acquired, Rackspace is looking to "seize the opportunity" that has emerged with its position as "the early leader in the fast-growing managed cloud services industry," CEO Taylor Rhodes said in a blog post Friday.

The deal will require approval of stockholders and regulators and will close quarter four. Rackspace stockholders will get $32 per share for a premium of about 38% over Rackspace's closing price of $23.16 on Aug. 3, the last trading day before news reports hit that speculated about the potential transaction, Rhodes said. (See Is Cloud Provider Rackspace Going Private?)

For further financial details, see Rackspace's announcement: Rackspace Going Private for $4.3B.

Rackspace's existing management team has been asked to stay on, including Rhodes.

Apollo will give Rackspace time to transition from its history running customer cloud applications in its own data centers to its more recent business model, where it provides professional services to enterprises making the transition to cloud.

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For example, Rodan + Fields, a skincare products company, relies on the cloud -- with Rackspace's help -- to support its direct sales business model. (See Cloud Lifts Rodan + Fields Towards $1B Revenue.)

Rackspace still maintains its own cloud services; it spearheaded development of OpenStack and is a leading implementer of that technology today.

Rackspace was an early mover as a cloud provider, but it has been outpaced by other contenders, particularly Amazon.com Inc. (Nasdaq: AMZN) and Microsoft Corp. (Nasdaq: MSFT), a current partner of Rackspace.

— Mitch Wagner, Follow me on TwitterVisit my LinkedIn profile, Editor, Light Reading Enterprise Cloud

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User Rank: Light Sabre
8/28/2016 | 12:33:51 PM
if they help customers transition to AWS, is it a long-term business? and what about margins? What happens to Openstack. Is it dead?
User Rank: Light Beer
8/26/2016 | 4:57:12 PM
I think this is a great move they should have done years ago. Great job anyway!
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