Rackspace, owned by private equity firm Apollo Global Management, has promoted president and CFO Amar Maletira to the CEO post, succeeding Kevin Jones, the multi-cloud MSP announced today.
The CEO change comes after Rackspace failed to find a suitable buyer for its business in August 2022, and reorganized into public and private cloud business units. Additional moves in 2022 include expanding the company's managed security business practices and data analytics capabilities.
Rackspace Explored Company Sale
The background: Rackspace since May 2022 had been “evaluating strategic alternatives and options” — which essentially means the multi-cloud MSP wanted to hear potential buyout bids for some or all of its businesses. Moreover, Rackspace had received “inbound interest” for one of its businesses, though the potential suitor and technology focus were not disclosed, the IT service provider indicated in May 2022.
Fast forward to August 2022, and Rackspace decided that “continuing to execute our strategy is our best path forward for value creation,” a spokesperson told Barron’s.
Although Rackspace is respected as multi-cloud MSP for Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP), the company's overall business growth rate has largely lagged the MSP and MSSP markets.
Indeed, Rackspace Q2 2022 financial results (which surfaced in August 2022) included
- Overall revenue of $772 million, up 4 percent from Q2 of 2021.
- A net loss of $41 million, compared to net loss of $37 million in the second quarter of 2021.
In stark contrast, the MSP market is growing about 9.45% annually, according to Technavio, and the MSSP market is generating double-digit annual percentage growth rates, Markets and Markets reports.
Rackspace CEO Change: CFO to Lead Multi-Cloud MSP
Fast forward to September 2022. In a prepared statement about the CEO change, Apollo Global Management Co-Head of Private Equity David Sambur said:
“Amar brings broad management and leadership experience, and over the course of his career, he has helped transform several multi-billion-dollar technology businesses. He has also been instrumental in crafting Rackspace Technology’s new strategic direction and operating model. We believe his appointment as CEO will allow us to improve and accelerate the execution of our new go-forward strategy.”
Added Maletira:
“I thank the Board for the opportunity to lead Rackspace Technology. I am very excited about the journey ahead and look forward to leading the company as we transition to our new strategy and operating model. Powered by our strong Racker culture and devotion to driving Fanatical Experience for our customers, we believe the execution of our strategy will establish the company as an industry leader.”
Maletira previously was CFO of Viavi Solutions and CFO of Hewlett-Packard's Enterprise Services for Americas. Maletira will also continue as CFO until a permanent CFO is named.
Former Rackspace CEO Kevin Jones now becomes an operating advisor with Apollo. Sambur thanked Jones for leading Rackspace over the past 3.5 years.
Rackspace Financial Performance, Multi-Cloud MSP Valuation
Looking ahead, Rackspace expects third quarter 2022 financial results to be within the previously announced guidance range of $769 million to $779 million for revenue. Financial results for the quarter are expected to be announced in November 2022.
Rackspace's market capitalization is $1.05 billion as of September 26, 2022 -- far lower than the $4.3 billion that Apollo paid to buy Rackspace in August 20216.
