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Apollo Global is buying Rackspace for $4.3B

businessinsider.com

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Re: Apollo Global is buying Rackspace for $4.3B

#91

Post by akulbe »

I understand that publicly traded companies are one cornerstone of our economy.

That said, it's depressing to see companies get bought and sold just to move money around, and the people that work in those jobs completely ignored, or just seen as pawns to manipulate for nothing more than the bottom line.

To me, when a company goes from private to public, it's not something to celebrate in the long-term.

The company's focus inevitably seems to go from doing/creating something innovative, to maximizing shareholder value at any expense.

Rackspace was awesome. RIP Rackspace. (I don't know this for a fact, of course... but as others have surmised already, this will likely be just another pump and dump.)

Re: Apollo Global is buying Rackspace for $4.3B

#92

Post by jszymborski »

20years wrote: post #88
jszymborski wrote: post #55

I'm praying that Mailgun doesn't get affected by this, they're absolutely awesome for the small shops like me (and easy to integrate).

Oh Yikes, totally forgot Mailgun is owned by RS. I have a few things using the Mailgun API too. I am hesitant to move to Sendgrid with what happened a couple of weeks ago and how they handled the outrage. At this point, I may just setup & manage my own box for email again. It is a real PITA but I just don't have a lot of faith in these 3rd party API's anymore.

There's always Amazon SES when looking for cheap, low-volume transactional email, but it's always a headache to setup.

Re: Apollo Global is buying Rackspace for $4.3B

#93

Post by abakker »

Rackspace's problem is this: they are not really a hosting business. They are a Managed services business. They USED to be a hosting business, but it turned out that their real value add was in running clouds for companies that couldn't do it themselves. My guess is that the real reason they sought this is that the hosting business is not going to grow, and they don't want to invest in it. Instead, they are going to transition into becoming a managed services provider for Openstack private clouds (customer premises or equinix), Azure and AzureStack, and AWS.

Many enterprises are not making the transition to Cloud cleanly, and Rackspace is positioning themselves as the premier services provider to deploy, manage, and monitor cloud usage for many organizations.

Re: Apollo Global is buying Rackspace for $4.3B

#94

Post by godzillabrennus »

dave_sullivan wrote: post #50
whateverdudes wrote: post #38

Earlier quoted context omitted.

Off topic, but can you tell me more about the issue with being taken over by a private equity firm? I work for a 10k employee company who will be taken off stock exchange and sold to a Chinese equity firm.

Besides cost cutting via layoffs being a favored (although by no means the only) strategy for PE firms, there's also debt servicing. Typically, PE companies buy the company while only putting down a small portion of the purchasing price. They finance the rest through banks. The whole concept is pretty similar to buying a house with a mortgage, except you're buying a company. The debt payments are then a tax write-off…

I looked into the PE model after meeting a VC firm GP who wanted to find a way to crash that model into the VC model. Dave explained the formula real well but I've also see that a PE firm will sometimes try and raise additional debt financing to grow the business after it purchases the business with debt. Basically the wager is that they can fuel growth (sales) quickly and sell out for a high enough multiple that they make a ton of money in a relatively short period of a few years.

This works in the PE world because these are businesses that have credit and can get debt financing. The typical VC backed company can't get debt financing because they are too risky (early stage) for a traditional lender. That basically but an end to that VC's plan.

Re: Apollo Global is buying Rackspace for $4.3B

#95

Post by cannonpr »

joering2 wrote: post #69

I'm only missing one thing out of your comments -- what will change for someone who spends over $10,000 per month across US, UK and HK on servers and hosting. Is it time to move forward?? Will my hosting be affected??

If you have a stable codebase and infrastructure you can probably still keep using them, if you rely on their technical services heavily I would start looking around. I expect most of their good people won't be there for much longer. In other words the services they provide you with will likely rapidly degrade.

Re: Apollo Global is buying Rackspace for $4.3B

#96

Post by bluedino »

crack-the-code wrote: post #57
caminante wrote: post #56

Earlier quoted context omitted.

RAX's strategy has shifted to "different segments" directly as a result of competition from AWS [0]. Now, AMZN has considerable supplier power over RAX: "The deal would have been unthinkable just two years ago, when Rackspace and AWS were fierce rivals. But in early 2014, Rackspace, facing ever slimmer margins amid a cloud-computing price war, withdrew from head-to-head competition with Amazon. Since then, it has foc…

Yes but even prior to this, Rackspace had been a managed cloud provider, meaning they offer services on top of the infrastructure. This is different than AWS.

Isn't 'managed cloud' kind of contradictory?

Shouldn't your cloud based application manage itself? That's kind of the point, not having to 'manage' it?

Re: Apollo Global is buying Rackspace for $4.3B

#97

Post by bluedino »

NetStrikeForce wrote: post #90
caminante wrote: post #65

Earlier quoted context omitted.

RAX has its roots in managed cloud, but they moved away from that. They got into IaaS, but have retrenched. Here's RAX's mapping of AWS to RAX P&S for IaaS [0]. That's a lot. RAX has decided to return to its roots (managed cloud) and seek differentiation because it can't compete on IaaS.[1] That'll be tough. RAX's going private to shift its P&S mix and turn things around. edit: I'll also point to jsode's great commen…

Rackspace's IaaS offering was never close to what AWS, Azure or even GCE offer. It was more similar to DigitalOcean or Vultr, who are not really IaaS but VPS providers. I mean, where are the VPCs? the incredibly redundant load balancing? the VPN gateways, etc? Disclaimer: It has been 2 years since I evaluated RAX's offerings.

Rackspace offers most of the services Amazon/Google/Microsoft does - but you're right, they did start out as Slicehost which is a Linode competitor (back in what...2009?)

Re: Apollo Global is buying Rackspace for $4.3B

#98

Post by AndyNemmity »

zymhan wrote: post #86
chollida1 wrote: post #9

I guess it was only a matter of time before they got bought out. It's tough to compete against one of Google, Amazon or Microsoft, competing against all 3 at the same time in an area that all three consider to be core to their future must just be cut throat! It's never great for a companies employee's to be taken over by a private equity firm, if you actually find someone whose had a good experience then please let m…

Isn't this deal similar to Dell going private? I can certainly imagine how it might not end well for a company that gets taken private, but I also think that trying to innovate and grow in such a competitive environment would be even harder if you have to worry about shareholders breathing down your neck.

Dell going private with it's original owner is very different than a portfolio company taking a company private.

Re: Apollo Global is buying Rackspace for $4.3B

#99

Post by AndyNemmity »

arethuza wrote: post #58
brightball wrote: post #24

Earlier quoted context omitted.

Great customer service.

Shockingly bad pre-sales though - in my last job I tried to engage with them on the hosting for a large scale ERP project for a multinational and they were pretty reluctant to get involved even though they advertised that they were targeting that niche and claimed expertise in the ERP application.

This is really a huge difference in the enterprise space. Projects are won and lost on the most trivial things, and having very intelligent people in presales is so critical.

Re: Apollo Global is buying Rackspace for $4.3B

#100

Post by narrator »

dave_sullivan wrote: post #50
whateverdudes wrote: post #38

Earlier quoted context omitted.

Off topic, but can you tell me more about the issue with being taken over by a private equity firm? I work for a 10k employee company who will be taken off stock exchange and sold to a Chinese equity firm.

Besides cost cutting via layoffs being a favored (although by no means the only) strategy for PE firms, there's also debt servicing. Typically, PE companies buy the company while only putting down a small portion of the purchasing price. They finance the rest through banks. The whole concept is pretty similar to buying a house with a mortgage, except you're buying a company. The debt payments are then a tax write-off…

It also depends on the kind of PE firm. The vulture firms will buy a stable firm and load it up with debt doing stock buybacks and then cash out and let the company crater.

Other firms, like Texas Pacific Group, are turn around specialists that take struggling firms and fix their business processes to make them run better and raise the stock price by actually building a better company.

There are a lot more of the former than the latter, mainly because it takes some uncommonly smart people to run the latter kind of fund and just a bunch of bean counting jerks to the run the former kind.

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