Rackspace Wants To Take Itself Private

Rackspace, a public enterprise cloud service provider, once considered a buyout from prominent competitors like Amazon’s AWS, Microsoft, and Google, is leaning towards privatization. In contrast to potential acquisitions or partnerships, this shift is indicative of a strategy often pursued by companies such as Dell, aiming to free themselves from public market obligations while fiercely navigating the rapidly evolving tech landscape.

Reports indicate that Rackspace has initiated discussions with a private equity firm to raise the required capital for this transition. An insider source confirms that the company has been feeling the strain of maintaining a public status. The spokesperson for Rackspace, however, is yet to respond to these speculations.

While weighing third-party offers with the guidance of Morgan Stanley, Rackspace board has been concurrently exploring various alternatives that align with their long-term strategies, evidently a private status gaining a good amount of support from inside.

Prior to this shift, the company had been entertaining three acquisition bids, including offers from HP and IBM. Despite the attractive offers, Rackspace’s valuation and continual revenue growth coupled with improving margins make the company an enticing takeover target but have not been deemed satisfactory by Rackspace, who see greater value in going private.

Rackspace has worked incessantly to distinguish itself from competitors by developing an open-source platform layer, OpenStack, which integrates atop its hosting services. This strategic move allows Rackspace to direct its investment towards support instead of engineering costs, positioning it as a credible partner amidst the crowded cloud-based hosting business environment.

Rackspace’s last privatisation round attracted investment from prominent names like Sequoia, Norwest, and Red Hat, which aligns with their broader strategy of escalating investment in cloud services.

The company’s decision and timeframe for this transition to private status remain under wraps with an announcement expected in the coming weeks. More comprehensive updates will only be released upon attaining board approval for a specific transaction or partnership.

This article was updated in 2025 to reflect current trends and insights.