Why Rackspace is Going Private, According to Its CTO

John Engates: Company will now do thing it couldn’t do as a public company

Yevgeniy Sverdlik

August 26, 2016

2 Min Read
Why Rackspace is Going Private, According to Its CTO
A “racker” working inside a Rackspace data center. (Photo: Rackspace)

Turns out the rumors were true. This morning Rackspace announced it was being acquired by a New York private equity firm, called Apollo Global Management, for $4.3 billion. Once the transaction is closed Rackpace will become a private company, its shares seizing to trade on NYSE.

Read moreRackspace Going Private in $4.3B Buyout

One of the things that stand out about the deal is the buyer itself. Apollo hasn’t traditionally invested in tech companies. It’s invested in cruise lines and Twinkies, but not tech.

Rackspace CTO John Engates says Apollo sees a big opportunity in investing into growing in a market where Rackspace has already secured a considerable lead: helping customers get a handle on complex multi-cloud environments.

Engates spoke about the deal with the WHIR, our sister site, today.

“We think that the timing is right generally because there’s so much change going on in the market right now around cloud and the need for companies to get the cloud, or start or accelerate on the journey of cloud,” he said. “Those conditions are better than ever I think because if you look out into the market to see who is doing what, Amazon is doing great, Microsoft is making a huge transition and doing great, other companies like Google are in the market…there’s lots of opportunity because every day we talk to customers who tell us they need the help.”

A big advantage of going private for a company is flexibility, which comes with freedom from pressure to constantly improve stock value. This pressure can make it difficult for companies to make long-view plays that may not pay off in the immediate future.

The deal is an opportunity for Rackspace to do more than it has done so far, Engates said, “and do things that might not have been possible under the scrutiny of the public market.”

A lot more on this at the WHIR

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