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NO SALE! Rackspace snubs all buyout offers, appoints new CEO

Claims strong results from 'managed cloud' strategy leave it better off alone

No Sale

Rackspace says it has given up on plans to either sell itself or merge with another company, and to prove it the cloud hosting provider has named a new CEO to lead its next phase of independent operation.

Rackspace had been considering "inbound strategic proposals" – meaning buyout offers – since May, when it brought in consultants Morgan Stanley and Wilson Sonsini Goodrich & Rosati to help it decide its next steps.

Since then, it has reportedly entertained several offers. Details have been scant, but US telco CenturyLink was one rumored suitor. But in the end, Rackspace wasn't satisfied with any of the bids.

"None of these proposals were deemed to have as much value as the expected value of our standalone plan," Rackspace cofounder and chairman Graham Weston said in a statement on Tuesday. "We concluded that the company is best positioned to drive value for shareholders, customers and Rackers through the continued execution of its strategic plan to capitalize on the growing market opportunity for managed cloud services."

Weston said the company also considered a share repurchase plan, but decided against it so that it could maintain liquidity.

In part, Rackspace credited its change of heart to its strong performance in its most recent financial quarter. The company earned record revenues of $441m in the second quarter of its fiscal 2014, a 17 per cent increase over the same period in the prior year.

At the time, shareholders weren't particularly impressed, since the company's profits were basically flat. But Rackspace pointed out on Tuesday that the quarter's sequential revenue growth of 4.3 per cent was its best showing since the fourth quarter of 2012.

Also on Tuesday, Rackspace announced that it had appointed its president, Taylor Rhodes, to be its next chief exec. Rhodes succeeds Weston in the role, who had been serving as CEO since former head man Lanham Napier stepped down in February.

"As a seven year leader of Rackspace, Taylor brings significant experience, dedication and passion to the role of CEO. He was instrumental in the development and execution of Rackspace's managed cloud strategy that is now delivering strong results," Weston said.

Under Rhodes, Rackspace will reportedly continue to pursue the recently launched strategy, in which it claims to offer better value to customers by taking care of some of the sysadminnery that larger rivals like Amazon and Google don't handle. ®

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