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Rackspace CEO Taylor Rhodes announced he will resign from the company in a blog posted Wednesday, six months after the company was taken private by Apollo Global Management. Rackspace President Jeff Cotton will step in as interim CEO while the board searches for a long-term CEO.
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Rhodes said he plans to become the CEO of a smaller private company based in another city that does not compete with Rackspace, but declined to provide further details.
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"When you’ve taken your company as far as you can, given your particular strengths and skills, it’s time to let someone else with different strengths step up and take it farther," wrote Rhodes.
Dive Insight:
The cloud market is maturing and consolidating, and Rackspace, an independent web hoster and managed services provider, may be among the first victims. Under the scrutiny of a new owners, the board may be looking to take the company in a different direction.
Rackspace has struggled in recent years to compete in the expanding market. Last year, the company was acquired by Apollo Global Management for $4.3 billion, which Rackspace leaders framed as a chance to grow and innovate while remaining outside of the public eye.
While those larger companies continue to grow and expand their cloud offerings, smaller cloud providers are having a hard time keeping up. According to Q4 data from Synergy Research Group released in February, Microsoft, Google and IBM each increased their worldwide market share by almost five percentage points over the last year, while "other" cloud providers — a group that includes the 10 providers with dramatically lower revenue than AWS, Microsoft, Google and IBM — dropped a point.
According to Gartner’s Magic Quadrant for Cloud IaaS report released last summer, Rackspace has solid basic features, however it has struggled to keep up with other cloud market leaders. In February, Rackspace laid off about 270 U.S. workers, or 6% of its workforce.
At the time, Rhodes said the layoffs are "focused mainly in areas where our workforce has grown more rapidly than our revenue," though he didn’t specify exactly which areas that includes.