Cloud

Rackspace’s latest filing reads like a for-sale sign

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Cloud and web-hosting provider Rackspace could be in for some major changes as the company sputters along in the shadow of cloud giant Amazon Web Services and other contenders.

Rackspace’s board has tapped Morgan Stanley to consider a number of queries that have come to the company in the past few months — “ranging from partnership to acquisition,” according to a filing the company submitted today to the U.S. Securities and Exchange Commission.

“No decision has been made, and there can be no assurance that the board’s review process will result in any partnership or transaction being entered into or consummated,” Rackspace said in the filing. “The company has not set a timetable for completion of this process and does not intend to discuss or disclose further developments with respect to this process unless and until the board approves a specific partnership or transaction.”

The deal could put Rackspace’s public-market investors out of their misery. The stock has generally been on a decline since January 2013, and in after-hours trading today, the stock was up more than 8 percent. The stock closed for the day at $30.68.

We heard independently a couple of months ago that Rackspace might end up being bought.

That tidbit wasn’t surprising. As Amazon announces one price cut after another for its manifold public cloud services — and competitors like Microsoft and Google do, too — Rackspace executives have said it’s quite happy to sit out the price wars, thank you very much.

And managed hosting, other companies have been coming up quickly. Linode and DigitalOcean in particular have attracted developer interest in the past few years.

Altogether, Rackspace’s net revenue growth has slid from more than 32 percent in 2011 to 15.6 percent at the end of last year.

RAX revenue growth Novet

That leaves Rackspace to try out vertical-specific strategies like a focus on digital marketing and a startup incubation program that could help it attract young developers to use the company’s infrastructure.

But such initiatives might be too little, too late. Amazon Web Services has jump-started infrastructure-as-a-service — renting out slices of physical servers for developers to build apps on and only pay for what they use — and Rackspace hasn’t kept up, even with its pioneering role in the OpenStack open-source cloud software project.

Today’s announcements just prove Rackspace’s troublesome circumstances.

More about the companies and people from this article:

Rackspace Hosting is the service leader in cloud computing, and a founder of OpenStack, an open source cloud platform. The San Antonio-based company provides Fanatical Support® to its customers, across a portfolio of IT services, incl... read more »

Rackspace (NYSE: RAX) is the #1 managed cloud company. Its technical expertise and Fanatical Support® allow companies to tap the power of the cloud without the pain of hiring experts in dozens of complex technologies. Rackspace is al... read more »

The Rackspace Cloud is a set of cloud computing products and services billed on a utility computing basis from the US-based company Rackspace. Offerings include web application hosting or platform as a service ("Cloud Sites"), Cloud St... read more »

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13 comments
Erik Engstrom
Erik Engstrom

We regret ever getting involved with Rackspace and are not quiet about it. If other customers feel the way we do, the writing is on the wall. Sell so the cleanup is someone else's problem.

Will Butler
Will Butler

I'd love to see them get bought by Amazon, Google, ect. We use Rackspace for hosting, and although their competitors are priced by half, it would cost us more in engineering time to change providers. An acquisition would do the lifting for us and slash the inflated price we're paying. 

Glenn Kutner
Glenn Kutner

It's because they didn't iron the wrinkles out of the table cover!

Kat Shoa
Kat Shoa

Time to get more specialized.

Adam Bunch
Adam Bunch

We aren't laying off good people, we rarely let people go, only if they are underperforming. We hire about 100 people a month right now

Jason Jersey
Jason Jersey

They keep laying off their staff. I know some really good people who have been laid off by Rackspace Hosting so far this year.