Rackspace CEO Rhodes resigns six months after sale

May 3, 2017 GMT

Rackspace Hosting CEO Taylor Rhodes is leaving the San Antonio-based managed cloud computing company on May 16, about six months after he steered it through a $4.3 billion sale.

On Wednesday, Rhodes wrote in a blog post titled “Why I’m Leaving Rackspace” that he will become CEO of a smaller private company in another city. He didn’t identify the company but said it doesn’t compete with Rackspace. He added he will be able to discuss it in more detail in a couple of weeks.

“It’s using cloud technologies to disrupt what has been a very low-tech industry,” Rhodes said in the post. “The company is going through growing pains and needs a CEO who has been through those challenges before.”

RELATED: Rackspace cutting 6% of U.S. workforce

Rackspace’s No. 2 executive, Jeff Cotten, will serve as interim CEO, spokeswoman Monica Jacob said.

“He and his fellow Rackers are determined to build on the momentum that Taylor created,” she said. A search for his replacement is under way. Cotten is a strong candidate to permanently fill the post, she said.

Cotten was named president earlier this year to fill the spot that had been vacated by Rhodes when he was promoted to CEO in 2014.

“We’re going to keep driving to expand Rackspace’s leadership of the fast-growing market for managed cloud services,” Cotten wrote in a blog post Wednesday.

New York private equity firm Apollo Global Management acquired Rackspace in November, taking the publicly traded company private. As part of the deal, Apollo targeted $100 million in annual cost reductions.

The ax fell three months ago when Rackspace announced it was slashing about 6 percent of its staff, or at least 275 of Rackspace’s more than 4,600-person U.S. workforce. About 200 of the jobs targeted for elimination were at its headquarters.

Rhodes called the cuts “personally painful” but “necessary and manageable.”

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Rhodes, who joined Rackspace in 2007, replaced company co-founder and former Chairman Graham Weston as CEO in 2014. Weston had been serving as chief executive on an interim basis.

At the time, Rackspace was facing intense and increasing competition from the likes of Amazon Web Services and Google Inc. But after a four-month review that included hiring investment banking firm Morgan Stanley to assist the company to size up its “strategic” options, Rackspace chose to remain as independent.

Less than two years later, in August, though, Rackspace announced a sale to Apollo.

“There are times when it’s great for companies to be public, and there are times that are great for companies to be private,” Rhodes said at the time. “When we were a private company, we could make decisions with a longer time horizon than potentially we can as a public company.”

Rhodes then reflected on the days when Rackspace was privately held, and operated without the constant scrutiny by public investors.

“And we knew the right things to do for the long-term viability of the company, and that’s what we feel excited about doing as a private company,” he added.

Rhodes made assurances that Rackspace would keep its headquarters in San Antonio.


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