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CEO Insists Rackspace Is Not for Sale

With Verizon Communications agreeing to acquire Terremark for $1.4 billion last month and Time Warner Cable following up with a deal to buy NaviSite for $230 million, it begs the question: are we going to see a wave of consolidation in the cloud computing industry? The obvious answer is: of course.

One company that claims it's not in play is Rackspace Hosting. Rackspace would appear to be a natural acquirer or acquire. The company is one of the leading players in the cloud computing industry. Revenues in 2010 were up 24 percent topping $780 million, the company announced last week. At that run rate, Rackspace's revenues this year will fall just shy of $1 billion.

CEO Lanham Napier insists Rackspace is not for sale. His game plan is to grow Rackspace into a "giant" organization. "We are a committed long term player to this market," Napier said during the company's earnings call last week. "There is going to be a Web giant that emerges from this technology shift and we want to be that giant."

He put it more bluntly in an interview with Forbes: "Our company is not for sale, and we want to whup these guys," he said, acknowledging it would be his fiduciary obligation to shareholders to consider any kind of substantial bid. Considering we are in the midst of a cloud computing gold rush, there are some deep pocketed companies that could make Napier an offer hard to refuse. Naturally any company is for sale at the right price.

Committed to hitting that $1 billion revenue milestone in this, its 13th year, Napier believes the $2 billion goal is in sight along with growing from 130,000 customers to 1 million. "Today we believe it is very much within our reach and that we have a solid plan to get there," he said during the earnings call.

And that plan does not call for buying any rivals to grow share, he added. "We will continue to be an organic based growth company," he said. "We will do acquisitions like we just announced [such as the deal to buy Cloudkick in December] but these are acquisitions about building capability, not trying to buy revenue or scale."

Posted by Jeffrey Schwartz on February 17, 2011 at 11:58 AM


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