‘Excited about 2 business units’

Don’t expect any deep insight into Rackspace’s restructuring until next month.

The Texas-based cloud computing provider said it would not release any new data until an analyst day in September. But some observers When Rackspace released its second-quarter earnings on August 9, you were hoping for some information.

Kevin Jones of Rackspace

There have been some hints about where Rackspace is headed. Initially, all CEO Kevin Jones responded to analysts was, “[W]We are excited about this company in two business segments. We see strong interest in the public cloud of things as well as the private cloud of things.

But later he added:[W]We are restructuring the company going to market,” he said.

Knowing that’s on the way, Jones added, “We think it’s wise to plan for a bit of disruption in the half-year as the team is doing a similar job in these changes.” Now having said that, we are confident that our management team is experienced and leading the company to the right operating model. So when the go-to-market teams embrace the change, the business stabilizes, then we accelerate and, as I said, our partners have given strong support to the formation of the transformation.

Amar Maletira, president and CFO at Rackspace, agreed. Next month, he said, “We look forward to sharing more details on the financial profile of both public cloud and private cloud businesses. And right now, we’re going through the detailed planning of this fix that Kevin talked about and we’re going to start with the new implementation model in the first phase of Budget Q3.

Why is Rackspace restructuring?

Rackspace has struggled to define itself in a crowded market. A classic of corporate restructuring, when organizations seek help with digital transformation, the company is faced with decisions about how best to compete. As cloud computing emerged to dominate the technology space, Rackspace positioned itself as a competitor to Amazon Web Services, Microsoft Azure, and Google Cloud. But it couldn’t keep up with the companies, so it switched to a managed service provider model. Now, Rackspace ranks as a top partner for hyperscalers even as it tries to define its footing.

May may look like another Rackspace restructuring or sale, although executives say selling parts of the company may make more sense than liquidating the entire company. Private cloud appears to be the biggest target at the intersection. Jones’ comments on Tuesday, however, indicate that Rackspace may be considering a merger into two businesses rather than a sale.

Rackspace’s Amar Maletira

“[O]Our vendors are encouraged to sell both public cloud and private cloud,” Maletira told analysts on Tuesday.

To be sure, Rackspace sees a huge opportunity in the public cloud. Last month, it hired Dharmendra Sinha from Cognizant to serve as its first public cloud president. Perhaps with that in mind, Jones told analysts on Tuesday.[W]I really continue to double down on the public cloud.

With the Rackspace restructuring in the works, how did Q2 earnings fare?

Rackspace’s second quarter financials fell on the weak side, which is hardly surprising. Rackspace itself provided lower guidance on second-quarter earnings than analysts expected. (They wanted to see 23 cents per share. Rackspace said the figure would be 15-17 cents, and that’s the latter before accounting for certain expenses.)

Indeed, Rackspace reported a net loss of $40.6 million for the three months ended June 30. Revenue was up just 4% from last year, and was $12.5 million short of analysts’ forecasts.

The company has been increasingly traded between Wall Street and private ownership in recent years. It was last announced in 2020 after going private in 2016. Before that, Rackspace was publicly traded. It is not known whether the upcoming Rackspace restructuring will affect its presence on Wall Street.