Hosting company Rackspace has ‘declared its commitment to remain independent’ after reports it was looking for a bigger partner to acquire it. This week it also appointed a new CEO, Taylor Rhodes, to lead and drive its managed cloud strategy.
Rackspace had been approached by multiple suitors who expressed interest in acquiring the company, as well as a number of companies seeking a partnership.
No bridegroom?
Comms service provider CenturyLink was reportedly considering a bid for Rackspace but discussions faltered after they failed to agree on a price, according to Reuters.
“We talked to a diverse group of interested parties and entertained different proposals,” co-founder and chairman Graham Weston said. “None of these proposals were deemed to have as much value as the expected value of our stand-alone plan.”
The board also considered and rejected a share repurchase programme on the grounds that the company needed to ‘maintain flexibility’. “We will continue to evaluate the benefits of implementing a buyback program in the future,” continued Weston.
Rhodes promotion
The Rackspace board promoted Taylor Rhodes from president to CEO of the company. Graham Weston, co-founder, chairman of the board and acting CEO, will continue to serve as non-executive chairman of the board.
In April Rackspace announced a strategy to add to its current offering of managing cloud infrastructure by offering complex tools and applications that run on top, such as databases and ecommerce platforms.
Rackspace added $20 million of new revenue in the second quarter of 2014 and reports sequential revenue growth of 4.3 percent.
Rackspace has been on the market for some time, according to market analyst Clive Longbottom, senior researcher at Quocirca, who said that Rackspace management had decided that it cannot compete in the market in its current form.
“It has been looking for a suitable acquirer for some time - but without real success. A few suitors have been rumoured, none of which seem to have come to anything. It doesn’t make sense for a large existing player such as Amazon to buy them - maybe a smaller, more dedicated business player wanting an existing base and data centers.”
“Rackspace is not looking to cash out - it wants to find a way for the platform and environment to move forward,” said Longbottom. “Any acquirer must agree not to asset strip or make massive changes to the Rackspace model - and that narrows the list of possible suitors down to only a few.