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Comment by rkrzr | Hacker News Reader

Rackspace 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!"

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Re: "Business not in terribly good shape" - there are 4.3 Billion reasons to suggest otherwise. This isn't the type of business that gets purchased without a lot of due diligence, and, we're not really in much of a tech bubble right now - so I thinks it's reasonable to asses that the underlying revenue/profit of Rackspace was sufficient to justify the (impressive) valuation.

This impressive (?) valuation is not so impressive compared to what it used to be. Fun fact: any current shareholder that bought the stock between June 2009 and August 2015 would have done better buying a S&P 500 tracker.

>Re: "Business not in terribly good shape" - there are 4.3 Billion reasons to suggest otherwise.

I believe the "not terribly good shape" is a measurement that's _relative_ to other competitors in the cloud infrastructure market.

Rackspace's yearly revenues ($2 billion) have gone nearly flat[1]. On the other hand, Amazon's AWS has seen so much growth[2] that they now pull more revenue per quarter ($2.5 billion) than Rackspace does for the entire year.

Back in the early 2000s -- before AWS hit the scene, Rackspace hosting was attracting customers with excellent datacenter uptime and "fanatical support"[3]. Those 2 factors are not meaningful enough to the cloud subscribers today which is why Rackspace tried various strategies such as promoting OpenStack (hey don't be locked into proprietary AWS!) and then eventually "consulting services" to help customers use AWS. Neither of those initiatives really moved the needle.

I'm currently a Rackspace customer spending $120 a year for them to host my email but customers like me are part of a dying source of revenue. (Everybody can use GMail for free!).

Rackspace is "mature" instead of being "hot growth" which often translates to "not doing too well".

[1]http://www.marketwatch.com/investing/stock/rax/financials

[2]http://www.statista.com/statistics/250520/forecast-of-amazon...

[3]https://www.rackspace.com/en-us/dedicated-servers/promise

The assumption on Hacker News is that a buyout/acquisition === failing. This is sometimes true and sometimes not true.

>The assumption on Hacker News is that a buyout/acquisition === failing

Their market cap was over $10BB a few years ago, and they were purchased for less than half of that. Something went wrong; what do you suppose that was?

I've had this experience as well. I thought it was a little funny that they would let us pay them to move us off their own service.

If we quickly compare Rackspace [1] against Amazon (as a whole) we can find Rackspace margins are bigger except on "Return on average equity".

[1] https://www.google.com/finance?q=NYSE%3ARAX

[2] https://www.google.com/finance?q=NASDAQ%3AAMZN

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.

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