Rackspace Goes Private

Struggling cloud computing provider Rackspace has been purchased by Apollo Global Management LLC, a private equity firm. The deal, worth approximately $4.3 billion, will take the company private to give it time to transition to a services business. “This transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings,” said Graham Weston, chairman and co-founder of Rackspace.

Recently, Rackspace’s traditional cloud computing business had been declining. “Rackspace’s public cloud services have been losing market share to the hyperscale providers,” said Joshua Yatskowitz, a Bloomberg Intelligence analyst. “The company has said current customers haven’t been churning, but it is seeing a smaller portion of new workloads, which have increasingly gone to the hyperscale players.” Rackspace adopted a new business model, helping enterprises shift their data center operations to the AWS and Azure cloud computing services, but so far that services business has not compensated for other declines.

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