Rackspace Hosting Goes Private

rackspaceThe seemingly unstoppable force of Amazon has forced another one of its competitors into seeking new ownership. Rackspace, the managed cloud computing company responsible for the creation of OpenStack, has just recently announced that a deal has been reached with private equity firm Apollo Global Management.

The total cost of the deal amounts to $4.3 billion, which equates to $32 for each share. Rackspace is the latest in a long line of companies to fall under the control of Apollo Global. Other big brands under the firm’s possession include Claire's, Caesars Entertainment Corporation and CORE Media Group.

Rumors have been rife for many years now that Rackspace was attempting to go private, but the company consistently attempted to retain its independency and keep up with its rivals. Unfortunately, the brand’s efforts were simply not sufficient to prevent this acquisition.

Why? Mainly because Rackspace has been competing with some of the biggest names on the planet, namely Amazon and Microsoft. In fact, Rackspace actually created the OpenStack project in the first place in order to help themselves and other companies keep up with the sheer power of Amazon Web Services.

What Is OpenStack?

OpenStack has proven to be the company’s finest success. It’s a completely free and open-source cloud operating system that allows companies to have their own data centers while making use of various cloud services and options, rather than being forced to stick to just one provider.

Essentially, OpenStack offers everything that Amazon Web Services doesn’t, and has a lot to offer its users. It’s no wonder that dozens of high-profile brands have decided to join up and make use of this system, including eBay, Intel, HP, Sony and NASA, who also helped to co-develop OpenStack in the first place. It’s a great system and can be managed via an online dashboard or command line tools.

Sadly for Rackspace, even an invention like OpenStack wasn’t strong enough to prevent the company from being bought out. The colossal might of giants like Amazon and Microsoft simply cannot be contested and things started to take a downturn a couple of years ago when Rackspace’s CEO, Lanham Napier, decided to leave the company.


The Future of Rackspace in this Industry

This event sparked a whole wave of rumors regarding the future of the brand, but Rackspace didn’t want to give up straight away. Companies value their independence and the freedom it provides, so it’s completely understandable that the folks at Rackspace were keen to keep on fighting.

It was at this point that the team decided to adopt a new strategy. Following the old adage “If you can’t beat them, join them”, Rackspace ceased its attempts to keep up with its big rivals and actually began trying to form partnerships with them.

First, the company teamed up with Microsoft and began trying to offer its support for the tech giant’s Azure cloud system. Afterwards, Rackspace went one step further and decided to join forces with Amazon, hoping to use its excellent public image and high quality customer service to help Amazon get more sales.

It was a smart plan, and it did actually work for quite some time. Indeed, Rackspace’s earnings reports were very positive in the early stages after its unions with Microsoft and Amazon. Unfortunately, that initial boost was quickly cancelled out and the brand’s profits once again started to drop.

As expected, the rumors of an impending started up once again and, this time, it seems as though those rumors were correct. Since the deal was confirmed, Rackspace representatives have revealed that over a dozen different investment firms were interested in purchasing the company, but Apollo Global Management seemed to be the perfect choice.

It’s certainly interesting to note that the brand decided to go private with a firm like Apollo, rather than being purchased by one of its big competitors or partners like Oracle or Amazon. The merger agreement itself was signed in late August and clearly represented the best possible course of action for the company.

The current president and CEO of the brand, Taylor Rhodes, revealed that he saw this moment as a significant opportunity to preserve the future of the brand. Rhodes emphasized that many companies nowadays are starting to make use of multi-cloud systems, which could spell a bright future for the cloud industry as a whole.

That said, the future of the industry remains significantly unclear. Some experts argue that Amazon has already become too great of a presence and that no other company, even giants like Google or Microsoft, will be able to compete in this particular industry.

Either way, the whole situation is particularly interesting and it will be fascinating to see how things play out over the weeks, months and years to come. The cloud has provided a veritable revolution and offers so much potential for expansion and development in the future. Now, it’s up to Rackspace and other companies to starting reaching that potential.

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