New Rackspace CEO Ends Rumors of Buyout

In May 2014, Rackspace acquired the services of Morgan Stanley in order to facilitate a potential buyout of the company. Since then, several companies expressed interest in purchasing Rackspace including high profile organizations such as telecommunications giant CenturyLink. The Rackspace buyout rumors have persisted for months and the whole endeavor seems to have led to some changes starting at the top of the chain.

Rackspace seems to have found its focus as co-founder and former CEO Grahem Weston has taken a non-executive role on the board. Taylor Rhodes was appointed Weston’s successor as the company looks to become a dominant player in the cloud infrastructure market.

Rackspace has shifted to a managed services strategy which is designed to give its customers a helping hand whenever they need it. While Rackspace has successfully built its niche by being the good guys of the cloud; providing managed services is a cost intensive task that isn’t kind to RackSpace’s profit margins. Industry experts note that RackSpace currently posted a 5.1% profit margin last quarter which was down from 6% in quarter 1.

When Google, Microsoft and Amazon all dropped their pricing for cloud services, Rackspace stood pat and banked on its reputation and fanatical customer support as being the catalyst for customers ultimately staying. Some customers left and Rackspace pivoted by beginning to come up with new product offerings such as SSDs and bare metal cloud. These offerings have helped Rackspace distinguish itself from traditional IaaS providers.

DCKnowledge quotes Rackspace’s new CEO as mentioning, “I’m so excited to not have this conversation with prospects and customers anymore; we are pumped to put this behind us.” However Rhodes did leave the door open for merger and acquisition talks to happen in the future, just not the foreseeable future. Rhodes goes on to say, “It’s on the table.” Rhodes goes on to note that “It will not be executed at this time.”