7 ms·

Rackspace Hires Morgan Stanley to Evaluate Options

67 points by AJ72 12y ago

bruceb 12y ago
Contemplating moving from RS to Linode. Anyone done the same? Was it worth it for the savings?
- 127001brewer 12y ago
  For myself, I greatly appreciate having a service like Mailgun available to Rackspace customers - does Linode (or another company) have a similar e-mail service?
  - fourstar 12y ago
    You don't need Rackspace to use mailgun, but Sendgrid also works nicely and is independent. Just like you don't need to use EC2 to use S3 (or Route 53, etc).
  - patio11 12y ago
    I'm pretty sure you can use Mailgun regardless of where you host at, FWIW.
    - hderms 12y ago
      Yeah, we use mailgun without Rackspace.
  - ceejayoz 12y ago
    Lots of competitors - Mandrill, Sendgrid, Postmark, Amazon SES, etc.
  - dangrossman 12y ago
    If you're using it for outbound mail, you might look at using Mandrill. They're much bigger -- it's MailChimp's backend, used by 5M companies. That means mail is their primary business, their ISP relationships are solid and you can count on them to have 24/7 staff if anything does go wrong. They're also quite competitive: 12K free e-mails per month, then cheaper than both Mailgun and Sendgrid. http://www.mandrill.com/ http://www.mandrill.com/
- AJ72 12y ago
  You should also consider the growing number of platform (PaaS) providers that make it super easy to manage the infrastructure yourself, and save you lots of money on the way. I believe that this is where most hosting providers are heading. Gone are the days that we should be dealing with infrastructure at the element level. While this is the wrong forum to list who to look at, if you have a Ruby on Rails app, look at Heroku or Ninefold
- supercoder 12y ago
  We moved an analytics web service we had on Rackspace to Linode the other day, and the results were fantastic. We've been able to lower prices by 75% due to actual lower cost as well as requiring fewer machines because of the increased performance.
- lvh 12y ago
  Why? Stock price seems to be completely independent from actual performance; and even then, This is just a consequence of speculation, not any actual change in anything. Basic financials look tip-top. OpenStack infrastructure means you're probably not locked in. Seems like a lot of work for something that may, incredibly hypothetically, be a bad thing. Based on a single news item, you're betting on not only a one-sided partnership, but one that somehow destroys your ability to use the company, in a bet that only makes sense to hedge against now if somehow in the future any of the things that make it easy to step away from a hypothetically-future-toxic-Rackspace are no longer true. This is a good thing, not a bad one.
rhizome 12y ago
So, current RS customers, the history of these kinds of actions tell us that right now is the best that Rackspace will ever be in the future.
us0r 12y ago
You generally don't see announcements like this. Are they having a hard time selling that's why it is out there? You would think some of these companies you read saying things like "we missed the cloud" would jump at this.
- nodesocket 12y ago
  Really nobody left, RAX is too big and requires another public company, mainly a blue blood to acquire them. IBM got Softlayer. Google, Amazon, and Microsoft obviously have their own clouds. RedHat has its own PaaS OpenShift. Awkward spot really. Perhaps Facebook wants to join the cloud hosting business, but I doubt it, since they've just coughed up insane amounts of cash with Oculus and whatsapp. Smart play though, Morgan Stanley will figure out the details and likely find a buyer eventually. MS is kind of like `The Wolf` from Pulp Fiction or Mike Ehrmantraut from Breaking Bad, no questions asked problem solvers.
  - alaskamiller 12y ago
    Facebook has Parse, maybe if that demo matures to having RAX needs then it's worthwhile.
    - akurilin 12y ago
      Parse was on AWS, at least before the acquisition, if I recall correctly.
  - rdl 12y ago
    HP would be my bet. They have "HP Cloud" which is OpenStack, and they're trying to get more into services in general. OTOH, kind of a clusterfuck in general, and presumably if HP had any interest they would have just done the deal rather than this customer-terrifying announcement. Maybe someone from Asia?
  - dredmorbius 12y ago
    Does Oracle still have whatever fragments remain of Sun's cloud service that nobody ever used?
dvanduzer 12y ago
Rackspace over-bet on managed services, and under-bet on physical plant.
smacktoward 12y ago
Aaargh. I love Rackspace. I was looking forward to being a happy Rackspace customer until I was old and gray. And all the things I love about them would be the first things to go after an acquisition. Aaaaaaaaaargh.
- yuhong 12y ago
  I wonder what would be a good acquirer.
  - rhizome 12y ago
    GoDaddy probably has the cash.
    - yuhong 12y ago
      And I think has improved since the Bob Parsons days.
      - bbunix 12y ago
        Verio might be a good match... NTT could afford it... and make them a player.
        tbyehl 12y ago
        Verio was a player. The largest by some measures. Then they exercised an option to force NTT to buy them out when the tech stock market tanked and have barely been heard from since. * I was in the first wave of NTT/Verio lay-offs.
    - FireBeyond 12y ago
      Please, no. Just, no. We have 80+ servers with Rackspace. Would go to AWS before enduring a GoDaddy-owned Rackspace, on general principles.
  - dvanduzer 12y ago
JohnTHaller 12y ago
Rackspace's real strength is in their managed services. Either with a managed dedicated server or managed cloud account. The level of support and assistance you get is something that isn't even available from Amazon, Google, etc. It seems, however, that Rackspace is feeling the pressure from both large and small players and some businesses go with Amazon, Google, etc and do all the OS and stack management in house while others go with the lower end (features/price/SLA) of a Digital Ocean or similar. Don't get me wrong, I think there's a place for all of them, and actually use both Digital Ocean as well as a Rackspace managed dedicated and cloud setup. But I think a lot of people are buying based on price and just accepting a lower level of support in the process. Oddly, some folks seem surprised by the lower level of support of some of these services (no phone support, lesser monitoring, increased downtime, backups that are lost when the node fails, etc), even several HN posters when these services have issues.
- nickstinemates 12y ago
  Given that, maybe one of the big players who want an entry in to the hybrid cloud/enterprise cloud space could use Rackspace's popularity as an entrypoint. I am a huge fan of Rackspace. They're a bunch great people who sure have a refreshing view on how to take care of their employees, their community, and their visitors.
- imsofuture 12y ago
  Rackspace has been dropping the ball on support, big time, over the past 6-12 months. I'm not sure what's changed, but it's not for the better.
  - dpcan 12y ago
    My experience has been the opposite. Live Chat help seems to fix just about every single problem we have on the fly, and they open Tickets when it gets more complicated, with thorough and fast follow-up. I have never been happier with my hosting support, and I've used company after company over the years. I've now been with Rackspace (Sites and Cloud Servers specifically) the longest. I should note that I ended up with them because they took over SliceHost (also great support), so I didn't really "choose" Rackspace based on anything, but loved SliceHost, and the transition was seamless, and the great support seemed to follow.
jamesjporter 12y ago
I wonder what this means for the future of OpenStack?
- tzakrajs 12y ago
  Same thoughts... hopefully HP wants to play ball.
  - dvanduzer 12y ago
    uhh, the Stack Stacks have almost nothing to do with RackSpace at this point.
  - kragniz 12y ago
    In the last few releases, HP has overtaken Rackspace in a number of development metrics. Poking around here is interesting: http://www.stackalytics.com http://www.stackalytics.com
bbunix 12y ago
Corollary - customers look for exit options... Glad we moved everyone off to AWS... pricing is an issue - everyone is lowering prices dramatically... tough market.
Aqueous 12y ago
Rackspace should have invested more in PaaS. Its only offering that could it semi-accurately call PaaS, Cloud Sites, is lacking - it supports few runtimes, without things like git-based deployment that would enable it to fit into a CI Pipeline, and it seems intended to host static websites with some dynamic features rather than full-fledged web applications. I think they are also failing by trying to differentiate themselves in a business that will end up being much like a utility. When your business acts like a utility it's kind of a race to the bottom on prices. Furthermore, in attempting to differentiate themselves, they failed to characterize their primary customer properly - the kind of person who interacts with RackSpace directly is not the kind of person who calls support a whole lot, and yet the quality of their managed support seems to be their sole differentiating factor. My company did take advantage of managed support a few times, and when we did so it was enormously helpful, but it wasn't enough to keep us there when we saw lower-cost offerings elsewhere, because we have enough expertise in-house to solve 99% of problems that come our way. That said, I own RAX and I would very much like to see the stock stop tanking. An acquisition proposition could send the price back up to near where I bought it - and who knows? Maybe I'll end up trading it in for some more AMZN ( a stock that has also been tanking, by the way.)
- deleted 12y ago
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- deleted 12y ago
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Oculus 12y ago
I really hope Mailgun will survive any acquisition or merger Rackspace goes through. I love the quality of service they provide.
- old-gregg 12y ago
  Mailgun cofounder checking in: we will, and yes - we will. ;-) Rackspace has been a great home for our team, we continue to grow nicely, we're funded very well and plenty of exciting things are on the roadmap.
rurounijones 12y ago
Since stock price seems to be independent of actual company performance these days... Is Rackspace actually in financial trouble? Or is it a case of shareholders moaning that their returns aren't good enough?
- badamson 12y ago
  They're fine financially. >$300M Cash, $70M of debt (most of which are capital leases). They say they've been approached by "multiple parties" so it's just a matter of trying to get the best offer. http://www.sec.gov/Archives/edgar/data/1107694/000110769414000025/rax8k_051514.htm http://www.sec.gov/Archives/edgar/data/1107694/0001107694140...
  - rurounijones 12y ago
    Ok, so assume I am an idiot on this (not far wrong). Why is their stock price not high? Just because they are not satisfying shareholders / wall street analysts? Are the slowly losing customers or see somethign in the future that will cause trouble?
    - badamson 12y ago
      This sums it up nicely: https://news.ycombinator.com/item?id=7753787 https://news.ycombinator.com/item?id=7753787.
      - rurounijones 12y ago
        Thanks, that does.
programminggeek 12y ago
If your whole business relies on staying in step with giant competitors with huge piles of money thrown off from other successful ventures to lower their costs and prices more aggressively then you can, it's going to be an ugly business in the long haul. Price is a terrible competitive advantage because unless you have a revolutionary cost structure to go with it, you're hosed once someone does something reckless, like lowering below cost to drive you out of business. Google and Amazon aren't going anywhere because they own search and ecommerce. Hosting and infrastructure are nice businesses for both companies, but they are fine without it. Rackspace without hosting and infrastructure revenue is not a company.
deleted 12y ago
[deleted]
hackaflocka 12y ago
"inbound strategic proposals"? god/alternative-deity help them.

67 points by AJ72 12y ago

bruceb 12y ago

Contemplating moving from RS to Linode. Anyone done the same? Was it worth it for the savings?

127001brewer 12y ago
For myself, I greatly appreciate having a service like Mailgun available to Rackspace customers - does Linode (or another company) have a similar e-mail service?
- fourstar 12y ago
  You don't need Rackspace to use mailgun, but Sendgrid also works nicely and is independent. Just like you don't need to use EC2 to use S3 (or Route 53, etc).
- patio11 12y ago
  I'm pretty sure you can use Mailgun regardless of where you host at, FWIW.
  - hderms 12y ago
    Yeah, we use mailgun without Rackspace.
- ceejayoz 12y ago
  Lots of competitors - Mandrill, Sendgrid, Postmark, Amazon SES, etc.
- dangrossman 12y ago
  If you're using it for outbound mail, you might look at using Mandrill. They're much bigger -- it's MailChimp's backend, used by 5M companies. That means mail is their primary business, their ISP relationships are solid and you can count on them to have 24/7 staff if anything does go wrong. They're also quite competitive: 12K free e-mails per month, then cheaper than both Mailgun and Sendgrid. http://www.mandrill.com/ http://www.mandrill.com/
AJ72 12y ago
You should also consider the growing number of platform (PaaS) providers that make it super easy to manage the infrastructure yourself, and save you lots of money on the way. I believe that this is where most hosting providers are heading. Gone are the days that we should be dealing with infrastructure at the element level. While this is the wrong forum to list who to look at, if you have a Ruby on Rails app, look at Heroku or Ninefold
supercoder 12y ago
We moved an analytics web service we had on Rackspace to Linode the other day, and the results were fantastic. We've been able to lower prices by 75% due to actual lower cost as well as requiring fewer machines because of the increased performance.
lvh 12y ago
Why? Stock price seems to be completely independent from actual performance; and even then, This is just a consequence of speculation, not any actual change in anything. Basic financials look tip-top. OpenStack infrastructure means you're probably not locked in. Seems like a lot of work for something that may, incredibly hypothetically, be a bad thing. Based on a single news item, you're betting on not only a one-sided partnership, but one that somehow destroys your ability to use the company, in a bet that only makes sense to hedge against now if somehow in the future any of the things that make it easy to step away from a hypothetically-future-toxic-Rackspace are no longer true. This is a good thing, not a bad one.

rhizome 12y ago

So, current RS customers, the history of these kinds of actions tell us that right now is the best that Rackspace will ever be in the future.

us0r 12y ago

You generally don't see announcements like this. Are they having a hard time selling that's why it is out there? You would think some of these companies you read saying things like "we missed the cloud" would jump at this.

nodesocket 12y ago
Really nobody left, RAX is too big and requires another public company, mainly a blue blood to acquire them. IBM got Softlayer. Google, Amazon, and Microsoft obviously have their own clouds. RedHat has its own PaaS OpenShift. Awkward spot really. Perhaps Facebook wants to join the cloud hosting business, but I doubt it, since they've just coughed up insane amounts of cash with Oculus and whatsapp. Smart play though, Morgan Stanley will figure out the details and likely find a buyer eventually. MS is kind of like `The Wolf` from Pulp Fiction or Mike Ehrmantraut from Breaking Bad, no questions asked problem solvers.
- alaskamiller 12y ago
  Facebook has Parse, maybe if that demo matures to having RAX needs then it's worthwhile.
  - akurilin 12y ago
    Parse was on AWS, at least before the acquisition, if I recall correctly.
- rdl 12y ago
  HP would be my bet. They have "HP Cloud" which is OpenStack, and they're trying to get more into services in general. OTOH, kind of a clusterfuck in general, and presumably if HP had any interest they would have just done the deal rather than this customer-terrifying announcement. Maybe someone from Asia?
- dredmorbius 12y ago
  Does Oracle still have whatever fragments remain of Sun's cloud service that nobody ever used?

dvanduzer 12y ago

Rackspace over-bet on managed services, and under-bet on physical plant.

smacktoward 12y ago

Aaargh. I love Rackspace. I was looking forward to being a happy Rackspace customer until I was old and gray. And all the things I love about them would be the first things to go after an acquisition. Aaaaaaaaaargh.

yuhong 12y ago
I wonder what would be a good acquirer.
- rhizome 12y ago
  GoDaddy probably has the cash.
  - yuhong 12y ago
    And I think has improved since the Bob Parsons days.
    - bbunix 12y ago
      Verio might be a good match... NTT could afford it... and make them a player.
      - tbyehl 12y ago
        Verio was a player. The largest by some measures. Then they exercised an option to force NTT to buy them out when the tech stock market tanked and have barely been heard from since. * I was in the first wave of NTT/Verio lay-offs.
  - FireBeyond 12y ago
    Please, no. Just, no. We have 80+ servers with Rackspace. Would go to AWS before enduring a GoDaddy-owned Rackspace, on general principles.
- dvanduzer 12y ago

JohnTHaller 12y ago

Rackspace's real strength is in their managed services. Either with a managed dedicated server or managed cloud account. The level of support and assistance you get is something that isn't even available from Amazon, Google, etc. It seems, however, that Rackspace is feeling the pressure from both large and small players and some businesses go with Amazon, Google, etc and do all the OS and stack management in house while others go with the lower end (features/price/SLA) of a Digital Ocean or similar. Don't get me wrong, I think there's a place for all of them, and actually use both Digital Ocean as well as a Rackspace managed dedicated and cloud setup. But I think a lot of people are buying based on price and just accepting a lower level of support in the process. Oddly, some folks seem surprised by the lower level of support of some of these services (no phone support, lesser monitoring, increased downtime, backups that are lost when the node fails, etc), even several HN posters when these services have issues.

nickstinemates 12y ago
Given that, maybe one of the big players who want an entry in to the hybrid cloud/enterprise cloud space could use Rackspace's popularity as an entrypoint. I am a huge fan of Rackspace. They're a bunch great people who sure have a refreshing view on how to take care of their employees, their community, and their visitors.
imsofuture 12y ago
Rackspace has been dropping the ball on support, big time, over the past 6-12 months. I'm not sure what's changed, but it's not for the better.
- dpcan 12y ago
  My experience has been the opposite. Live Chat help seems to fix just about every single problem we have on the fly, and they open Tickets when it gets more complicated, with thorough and fast follow-up. I have never been happier with my hosting support, and I've used company after company over the years. I've now been with Rackspace (Sites and Cloud Servers specifically) the longest. I should note that I ended up with them because they took over SliceHost (also great support), so I didn't really "choose" Rackspace based on anything, but loved SliceHost, and the transition was seamless, and the great support seemed to follow.

jamesjporter 12y ago

I wonder what this means for the future of OpenStack?

tzakrajs 12y ago
Same thoughts... hopefully HP wants to play ball.
- dvanduzer 12y ago
  uhh, the Stack Stacks have almost nothing to do with RackSpace at this point.
- kragniz 12y ago
  In the last few releases, HP has overtaken Rackspace in a number of development metrics. Poking around here is interesting: http://www.stackalytics.com http://www.stackalytics.com

bbunix 12y ago

Corollary - customers look for exit options... Glad we moved everyone off to AWS... pricing is an issue - everyone is lowering prices dramatically... tough market.

Aqueous 12y ago

Rackspace should have invested more in PaaS. Its only offering that could it semi-accurately call PaaS, Cloud Sites, is lacking - it supports few runtimes, without things like git-based deployment that would enable it to fit into a CI Pipeline, and it seems intended to host static websites with some dynamic features rather than full-fledged web applications. I think they are also failing by trying to differentiate themselves in a business that will end up being much like a utility. When your business acts like a utility it's kind of a race to the bottom on prices. Furthermore, in attempting to differentiate themselves, they failed to characterize their primary customer properly - the kind of person who interacts with RackSpace directly is not the kind of person who calls support a whole lot, and yet the quality of their managed support seems to be their sole differentiating factor. My company did take advantage of managed support a few times, and when we did so it was enormously helpful, but it wasn't enough to keep us there when we saw lower-cost offerings elsewhere, because we have enough expertise in-house to solve 99% of problems that come our way. That said, I own RAX and I would very much like to see the stock stop tanking. An acquisition proposition could send the price back up to near where I bought it - and who knows? Maybe I'll end up trading it in for some more AMZN ( a stock that has also been tanking, by the way.)

deleted 12y ago
[deleted]
deleted 12y ago
[deleted]

Oculus 12y ago

I really hope Mailgun will survive any acquisition or merger Rackspace goes through. I love the quality of service they provide.

old-gregg 12y ago
Mailgun cofounder checking in: we will, and yes - we will. ;-) Rackspace has been a great home for our team, we continue to grow nicely, we're funded very well and plenty of exciting things are on the roadmap.

rurounijones 12y ago

Since stock price seems to be independent of actual company performance these days... Is Rackspace actually in financial trouble? Or is it a case of shareholders moaning that their returns aren't good enough?

badamson 12y ago
They're fine financially. >$300M Cash, $70M of debt (most of which are capital leases). They say they've been approached by "multiple parties" so it's just a matter of trying to get the best offer. http://www.sec.gov/Archives/edgar/data/1107694/000110769414000025/rax8k_051514.htm http://www.sec.gov/Archives/edgar/data/1107694/0001107694140...
- rurounijones 12y ago
  Ok, so assume I am an idiot on this (not far wrong). Why is their stock price not high? Just because they are not satisfying shareholders / wall street analysts? Are the slowly losing customers or see somethign in the future that will cause trouble?
  - badamson 12y ago
    This sums it up nicely: https://news.ycombinator.com/item?id=7753787 https://news.ycombinator.com/item?id=7753787.
    - rurounijones 12y ago
      Thanks, that does.

programminggeek 12y ago

If your whole business relies on staying in step with giant competitors with huge piles of money thrown off from other successful ventures to lower their costs and prices more aggressively then you can, it's going to be an ugly business in the long haul. Price is a terrible competitive advantage because unless you have a revolutionary cost structure to go with it, you're hosed once someone does something reckless, like lowering below cost to drive you out of business. Google and Amazon aren't going anywhere because they own search and ecommerce. Hosting and infrastructure are nice businesses for both companies, but they are fine without it. Rackspace without hosting and infrastructure revenue is not a company.

deleted 12y ago

[deleted]

hackaflocka 12y ago

"inbound strategic proposals"? god/alternative-deity help them.