American cloud computing company Rackspace Technology has announced that it is considering selling part of its business following an in-depth strategic review, and may have already found a potential buyer.
CEO of Rackspace Technology Kevin Jones released a statement saying that after the strategic review, “based on inbound interest for one of our businesses, we concluded that a sum of the parts valuation of Rackspace Technology could be greater than our current enterprise value, in part driven by the attractive growth profile of public cloud.”
Jones also said that further details would be provided about the company’s new strategy and financial plans at its Analyst Day in September.
Rackspace’s Quarter Performance
Two years ago, Rackspace had undergone a rebranding (from ‘Rackspace’ to ‘Rackspace Technology), refocusing itself as a multi-cloud solution provider.
In Rackspace Technology’s First Quarter 2022 Earnings Conference Call, the company reported $776 million in revenue for its first quarter of fiscal year 2022, a 7% increase compared with the first quarter of fiscal year 2021. In addition, Rackspace’s losses had also narrowed from $64 million in the first quarter of 2021, to $39 million in the first quarter of 2022.
Since its rebranding in 2020, Rackspace has been the only pure play multi-cloud service solution provider to address both public cloud and private cloud markets at scale.
Different Cloud Growth Prospects
During the call, Jones said that the cloud market’s significant momentum enabled Rackspace’s cloud hyperscaler partners to grow cloud revenue by $10 billion in the first quarter of 2022 alone.
However, while the cloud market has been growing well, Jones also acknowledged that public cloud and private cloud have different operating models, growth trajectories, and investment prospects. Public cloud and private cloud also require different skill sets and levels of investment demand.
Furthermore, while public cloud has been undergoing a long-term secular growth wave with significant growth opportunities, private cloud and managed hosting is currently in a low growth market.
Hence, to manage these differences more efficiently, and to address customers’ booming demand for public cloud services more effectively, Rackspace is considering an internal reorganization to realign the company’s investments and resources across the two markets.
Jones noted that with the attractive growth profile of the public cloud market, all strategic alternatives were on the table for Rackspace Technology. Finally, he said that Rackspace Technology would continue to evaluate all options, and would provide further information as appropriate in light of developments.
