Apollo Buys Rackspace for $4.3 Billion

Apollo Buys Rackspace for $4.3 Billion

Yet another small hosting company is being absorbed by an industry giant: Apollo Global Management LLC is buying Rackspace Hosting Inc. for $4.3 billion.

Big names like Amazon and Google are increasingly dominating the hosting and Cloud storage market, thanks to their constantly slashed prices and ever-growing array of options. It’s no surprise, then, that smaller players like Rackspace have been struggling to keep up with the high-end competition. More and more are either folding or being bought out by larger corporations.

Rackspace’s struggle with keeping up with their more affluent rivals has been well-documented in recent years.

The private cloud storage company had first gone public in 2008 and enjoyed significant growth in the years that followed. This was due to the increase in companies moving their work software to rented servers on the web instead of housing it in their own data centers. However, Rackspace started to go downhill in 2013 when Internet giants like Amazon, Google, and Microsoft entered the market and began cutting prices at astonishing rates.

Unable to meet the increasingly competitive pricing in the web hosting, cloud storage and IT service industry, Rackspace eventually turned to helping companies shift IT operations to data centers controlled by bigwigs like Microsoft.

This change in strategy wasn’t enough in the end, as their business continued to decline to the point that speculation wasn’t about whether they would be taken over, but by who. In the end, Apollo won the bid.

What’s next for Rackspace?

Now that Rackspace have been bought out, the transformation from public to privately-owned company will give them the resources needed to turn themselves into a services business.

Says Bloomberg Intelligence analyst Joshua Yatskowitz: “Rackspace is gaining traction, but they’re very small. Bringing it out of the public eye can make that transition a lot easier.”

Rackspace co-founder and chairman of the board Graham Weston was optimistic about the acquisition, saying in an official press release:

“This transaction is the result of diligent analysis and thoughtful strategic deliberations by our board over many months. Our board, with the assistance of independent advisors, determined that this transaction, upon closing, will deliver immediate, significant and certain cash value to our stockholders. We are also excited that this transaction will provide Rackspace with more flexibility to manage the business for long-term growth and enhance our product offerings. We are confident that as a private company, Rackspace will be best positioned to capitalize on our early leadership of the fast-growing managed cloud services industry.”

Personally, we at BestHosting are sad to see another smaller fish in the web hosting pond be bought out by a bigger name. If you feel the same way, check out our reviews page for write-ups on plenty of excellent providers that can meet your hosting needs just as well if not better than their major player rivals.

Published on: September 7,2016.
Canadian writer currently living in Hungary. Avid lover of travel, technology, politics, fashion, and French music.

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