Rackspace tight-lipped about takeover rumours
Rackspace refuses to address press speculation as it reports rise in Q2 sales and profits and voices caution over Brexit
Rackspace was staying mum on widespread rumours it is on the brink of being acquired as it unveiled a rise in Q2 sales and profits.
The managed hosting firm's share price leapt by 30 per cent on Friday following a Reuters report that it is in talks to be acquired by Apollo Global for $3.5bn (£2.7bn), a topic CEO Taylor Rhodes refused to discuss during the Q2 conference call.
Rackspace posted a 17 per cent year-on-year rise in EBITDA to $187.3m for the three months to 30 June on revenues that rose seven per cent to $524m.
However, the NYSE-listed firm was cautious about the remainder of 2016, saying asset divestitures and currency movements will wipe $70m off its full-year revenues.
It also referenced a post-Brexit slowdown in spending among clients in its UK business, which generates 20 to 25 per cent of UK revenues and employs 1,000 staff. A large UK travel business it supplied recently went under, it added.
Alongside its results, Rackspace announced the divestment of its "non-core" Cloud Sites business, a move which follows the sale of its online storage business, Jungle Disk, in Q1.
But when asked whether a takeover of the company as a whole is on the cards, as rumours have suggested for months, Rhodes said it "would be inappropriate" to comment on "these types of speculations".
He claimed Rackspace made "strong progress" on its key financial metrics in Q2 and is "well on [its] way to becoming the number one managed cloud provider for customers who use Amazon Web Services [AWS]".
Rackspace has signed 277 customers to its AWS service since it was launched last October, with buyers split evenly between existing Rackspace customers and new customers, Rhodes said.
"Winning new AWS workloads from our dedicated hosting customers is a big part of our strategy," he said on the call, a transcript of which can be found here, as he admitted Rackspace's core business is slowing.
A "bold" marketing campaign that will seek to distinguish Rackspace from "slow-moving technology vendors and SIs" and "small-scale providers" in the managed cloud space is also in the offing, Rhodes added.
"We plan to make the market aware that there is one provider that operates at scale, covering their needs from end to end with expertise and managed services for the world's leading clouds. That provider is Rackspace. Look for this sustained marketing campaign to launch in the coming months," he said.