Rackspace Names New Boss After Takeover Refusal

Tom Jowitt is a leading British tech freelance and long standing contributor to TechWeek Europe

Rackspace rebuffs takeover offers and ends ‘strategic review’. It also appoints a new CEO

It has been a busy period of Rackspace Hosting after it said had rejected takeover offers amid a strategic review, and would remain an independent company.

The San Antonio-based company also announced the appointment of a new chief executive officer (CEO).

Strategic Review

Rackspace has hired Morgan Stanley back in May to seek strategic options going forward for the company. It reportedly received multiple takeover and partnership approaches, including am takeover offer from a Louisiana-based telephone provider called CenturyLink.

However discussions with CenturyLink reportedly stalled after the two companies failed to reach an agreement on price.

Rackspace had sought the strategic review of its operations amidst a highly competitive cloud sector. Amazon, Google, and Microsoft have all recently reduced prices, and Rackspace is also seeing growing competition from traditional telecom operators. Despite that, it’s business is reportedly booming, and the company has announced dedicated data centre space in the UK.

“The company declared its commitment to remain independent and announced Taylor Rhodes as CEO to lead and drive its managed cloud strategy,” it said in a statement. “After a comprehensive review, the board decided to terminate M&A discussions.”

westonrackspace“We ran a thorough process under the direction of our board of directors, independent advisors, and a Strategic Transaction Committee of the Board,” said Graham Weston, Rackspace co-founder and chairman. “In this process we talked to a diverse group of interested parties and entertained different proposals. 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 capitalize on the growing market opportunity for managed cloud services,” said Weston.

He also rejected investor pressure for a share repurchase scheme.

“The board also considered a share repurchase program and determined that, based on the company’s significant opportunities, it is prudent to maintain flexibility at this time to ensure that the appropriate investments can be made to drive our strategy forward,” Weston added.

New Boss

Amidst all of that, the company had also been searching for a new permanent boss, after Weston was named as Rackspace’s interim CEO in February after the retirement of Lanham Napier, who had been CEO for eight years.

It named Taylor Rhodes to be the company’s chief executive officer as well as a member of the board, effective immediately. Rhodes had been with the company since 2007 in a number of positions. He also retains his previous role as president and remains responsible for the company’s operations worldwide.

“With each new role and challenge that Taylor has taken on, he has demonstrated inspiring leadership, delivered results and displayed passion for Rackspace and our customers,” co-founder Weston said. “Importantly, he has played a critical role in the development and execution of the company’s strategy to renew its focus on managed cloud market leadership, actions which are driving the reacceleration of the company’s results and underpinning our positive outlook.”

“I would like to thank the board for its confidence in me, and Graham for providing the leadership that has helped Rackspace become the #1 managed cloud company,” said Rhodes. “Graham has been a valued mentor to me, and I look forward to his continued guidance and advice.”

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