UPDATED 16:04 EDT / APRIL 17 2020

CLOUD

Report: Rackspace has secretly filed to go public with eye to $10B+ valuation

Rackspace Holding Inc. has confidentially filed for an initial public offering that could value it at more $10 billion including debt, according to sources cited by Reuters on Thursday.

Rackspace started out as a hosting provider in 1998 and debuted on the New York Stock Exchange a decade later. In 2016, the company once again became private after being acquired by investment firm Apollo Global Management Inc. for $4.3 billion.

Under Apollo’s ownership, Rackspace has expanded its focus from hosting to also providing consulting services that help enterprises adopt cloud platforms such as Amazon Web Services and Microsoft Corp.’s Azure.

As SiliconANGLE has chronicled, the coronavirus pandemic is leading many organizations to fast-track their adoption of cloud services. This race to the cloud, and the related jump in the share prices of companies positioned to capitalize on the trend, was apparently a factor behind Rackspace’s decision to file for an IPO filing.

The sources who spoke to Reuters said that the acceleration in digital transformation initiatives has “breathed new life into Rackspace’s business.” Owner Apollo had been exploring an IPO for two years, the news agency cited the tipsters as saying, but a listing wasn’t attractive because Rackspace experienced slow organic growth.

The demand surge Rackspace is reportedly seeing provides yet another sign that enterprises are leaning on the cloud, and the major infrastructure-as-a-service platforms in particular, more than ever amid the new reality of remote working.

An even clearer picture of the situation should emerge once the major providers release earnings for the last quarter. Google LLC parent Alphabet Inc., Microsoft Corp. and Amazon.com Inc. are scheduled to announce their earnings, including cloud computing revenue, on April 28, 29 and 30, respectively.

That Rackspace is said to be capturing the increased demand for cloud computing also provides a measure of validation for the company’s competitive strategy. Last May, Prashanth Chandrasekar, at the time Rackspace’s head of cloud and infrastructure services, detailed the thinking behind this strategy in an interview on SiliconANGLE Media’s theCUBE studio (below). 

“We believe the world of traditional IT services of large monolithic contracts [is] effectively gone,” Chandrasekar said. He contrasted those contracts with Rackspace’s approach, in which he said that “the idea is for us to say customers are on a very bespoke journey, everyone is on an individual journal — let’s meet them exactly where they are.”

Photo: Rackspace

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