Rackspace abandons takeover plans, appoints Taylor Rhodes as CEO

Open source cloud provider Rackspace has dismissed all merger and acquisition discussion to continue with its current independent trajectory – and has named Taylor Rhodes as new chief executive.

Rhodes joined Rackspace in 2007 and was appointed president of the company back in January. He takes over from Graham Weston, CEO from 1999 to 2006, who had temporarily held the fort since the shock retirement of Lanham Napier in February.

“Our board conducted a thorough search of highly qualified internal and external candidates, and we are confident that Taylor is the right person to lead Rackspace through its next phase of growth,” said Sam Gilliland, lead independent director of the Rackspace board in a statement.

“Throughout his tenure, Taylor has proven himself to be an inspiring leader, a strategic thinker and a committed Racker,” he added.

There had been talk of potential merger or acquisition activity at Rackspace, with the company disclosing that multiple parties were interested.

Former CEO Weston explained the updates. “We talked to a diverse group of interested parties and entertained different proposals,” he said in a statement, adding: “None of these proposals were deemed to have as much value as the expected value of our standalone plan.

“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 capitalise on the growing opportunity for managed cloud services,” he added.

The wording of the press material indicates that Rackspace has taken this decision on its own merits – but not all are convinced. Rackspace shares have plummeted in the aftermath of the announcements, according to Business Insider.

Ben Kepes, writing for Forbes, noted pessimistically: “I was worried about Rackspace’s future before this potential sellout was announced, and nothing I’ve seen since has changed my perspective.”

The company’s ethos, stated at the start of the year, was to continue its push towards OpenStack and hybrid cloud models. This time around, with analysts inevitably about to ask questions over why M&A never materialised, Rackspace is pointing towards gaining increased share in the managed cloud market, as CloudTech reported earlier this year, as well as an upturn in figures.

Rackspace added more than $20m of new revenue in a single quarter in Q214, the first time this has happened in the firm’s history. Sequential revenue growth of 4.3% in the same quarter was the highest since 2012. But is this all short term gain masking long term pain?

The company also fiercely cultivates its relationship with customers – the term Rackers for instance, and claims of ‘fanatical support’. With this strength in branding, Rackspace remains on a sure enough footing for now. But as Rhodes steps into the hot seat, it may be a baptism of fire for the seven year veteran.

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