Over the past six months I've been battling with poor service from Rackspace, with hosts mysteriously dying and their agents are trying to upsell me (load balancers for a single server, for example). We're migrating away but this doesn't surprise me.
Apollo Global is buying Rackspace for $4.3B
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Re: Apollo Global is buying Rackspace for $4.3B
#12Rackspace has been looking for a buyer for a while. I suspect that their business is not in terribly good shape. They even started consulting on AWS deployments a while back: "Need some help moving your servers over to AWS? We're here to help!"
It's not that uncommon for hosting companies to do AWS consulting. It's a way for the company to get customers that they might otherwise lose, and then perhaps they can move them to their own infrastructure at a later point.
Rackspace isn't mentioned as an option as often as they where a few years ago though.
Re: Apollo Global is buying Rackspace for $4.3B
#13Nice. So in a few years, there will be one less competitor in this space.
Re: Apollo Global is buying Rackspace for $4.3B
#14Has there been any analysis on the upswing in acquisitions of cloud computing and storage companies? First EMC gets bought by Dell, now Rackspace is getting picked up. Is it just in response to growth on the part of Google and Amazon?
The Dell/EMC purchase may have been just to buy and then sell VMware, which EMC owned. If I recall correctly, EMC and VMware had both lost meaningful value after uniting and it was commonly held that VMWare was worth much more, so Dell is likely try to rip those two apart, pump VMware back up, sell it at a profit on the whole EMC purchase, and keep the EMC assets as gravy.
One sign of this occurring is the aggressive layoffs VMWare initiated of its cost centres (e.g. in support) soon after the purchase.
Re: Apollo Global is buying Rackspace for $4.3B
#15Are Apollo likely to make money from it?
Re: Apollo Global is buying Rackspace for $4.3B
#16I'm sure Rackspace is a great service for established companies and startups but for the rest they were always too expensive. I never felt like the premium paid made a difference.
Re: Apollo Global is buying Rackspace for $4.3B
#17I like to look at comparisons like this:
That is about 1 Yahoo in 2016
Or about 3 youTubes in 2006
Or 1.5 Lucasfilms in 2012
Or 0.2 Whatsapps in 2014
EDIT: Whatsapps number corrected, thanks.
Re: Apollo Global is buying Rackspace for $4.3B
#18Are Apollo likely to make money from it?
PE companies usually do. They will just layoff a bunch of people cut salaries and probably saddle it with debt and get as much cash flow they can from the company.
Re: Apollo Global is buying Rackspace for $4.3B
#19I like to look at comparisons like this: That is about 1 Yahoo in 2016 Or about 3 youTubes in 2006 Or 1.5 Lucasfilms in 2012 Or 0.2 Whatsapps in 2014 EDIT: Whatsapps number corrected, thanks.
0.2 Whatsapps
Re: Apollo Global is buying Rackspace for $4.3B
#20Earlier quoted context omitted.
Apollo is a private equity firm, so they are most likely acquiring Rackspace because they see fat they can trim (read: laying people off, outsourcing labor, tax optimization) off a decently competitive company that they can possibly take public or sell in 5-10 years. It's not so much about competing with Amazon, Google, etc. or advancing the state of the technology as much as making a bet that the brand is currently…
(Disclaimer: former employee of Rackspace) That is exactly how I read it. While Rackspace has been doing pretty well, its just not growing as fast as its competition and Wall Street in concerned. It is a big shame though. Rackspace is one of the few Texas-born companies that managed to strike it big and still have a very egalitarian culture. They have a very interesting culture and I wish it was something that could…
For a successful LBO, growth is largely irrelevant. What is relevant however, is that you can protect your existing market share. If you can buy a company for $1bn with $800m in debt and pay that down, and sell it for $1bn again 5 or 10 years down the line, you just made a cool $800m. If you can double the net profit, you'll be able to sell it for $2bn, etc.