Rackspace CEO Retires Following Q4 Earnings Release
Rackspace (RAX) CEO Lanham Napier is retiring from his posts as CEO and the Rackspace board of directors, effective immediately. The announcement was made following the company’s earnings conference call on Monday.
Former CEO and current executive chairman of the board, Graham Weston, will return to the post of CEO. Rackspace will initiate a search for a successor to Napier. Last month Rackspace announced that Taylor Rhodes, the company’s chief customer officer, has been appointed to the job of president, effective immediately.
Rackspace said that Rhodes has guided the company towards its mission of bringing the power of Rackspace’s hybrid cloud portfolio to global markets.
Rackspace signals strategy shift
In the earnings call, Weston provided insights into a strategy shift towards hybrid cloud and value-added services around that cloud to differentiate from an increasingly commoditized infrastructure-as-a-service market dominated by giants such as Microsoft (MSFT), Google (GOOG) and Amazon (AMZN). Here’s what he said (from the SeekingAlpha transcript):
“We will establish ourselves as the leading service specialist in the hybrid cloud with clear differentiation from the do-it-yourself approach of the industry giants…Hybrid cloud leverages our leadership position in the OpenStack and our heritage as the inventor of the managed hosting industry to offer each customer the right combination of the public cloud, private cloud and dedicated hardware…
“We will invest in deepening our expertise and expanding our innovative offerings in rapidly growing technology such as modern data engines and e-commerce platforms.”
Weston identified “pragmatic businesses” as the next generation of its customers. These companies want software engineers create differentiators for their core businesses “rather than operating infrastructure and learning the endless succession of complex new tools. These customers will want the trusted partner to keep their IT operations running smoothly. They will want expert advice as they move to a hybrid cloud architecture and they will want specialists to help them leverage the latest tools to exploit Big Data and digital marketing.”
Earnings
Rackspace saw a 30 percent decline in net income from the same period a year ago. Here are the key numbers from the earnings announcement.
Rackspace announced net revenue of $408 million for the fourth quarter of 2013, up 4 percent sequentially and 16 percent from the same quarter a year ago. Net revenue was positively impacted by currency exchange rates by $4.2 billion in the previous sequential quarter and $800,000 compared to the same quarter a year ago, the company said in a statement.
Total server count increased to 103,886, up from 101,967 servers at the end of the previous quarter. Server count during the same quarter last year was 90,524.
Net income was $21 million for the quarter, up 27.5 percent sequentially and down 30 percent from the fourth quarter of 2012. Net income margin for the quarter was 5.1 percent compared to 4.2 percent for the previous quarter and 8.5 percent in the fourth quarter of 2012.
On a worldwide basis, Rackspace employed 5,651 as of December 31, 2013, up from 5,450 in the previous quarter. That’s also an increase from the number employed on December 31, 2012, which was 4,852.
Napier’s future
Napier, who is 43 years old, may be retiring from Rackspace but not from work. He plans to invest in and advise “other entrepreneurial companies following a decision to step away from public company executive leadership.”
Over the next several months, Napier will serve as a consultant to Rackspace to ensure a smooth transition, the company said.
“I believe now is a natural transition point to select a new leader for the next exciting phase of Rackspace’s growth,” Napier said in a statement. “I look forward to following Rackspace’s success as I return to my entrepreneurial roots – to build new things and invest in disruptive ideas.”
While Weston will be taking over as CEO, Rackspace said it plans to keep searching for a “long-term successor CEO.” The company said it has retained a recruiting firm to assist with the search — candidates will be internal and external.
“I’m personally grateful to Lanham for fourteen years of partnership and friendship as we worked side-by-side to build this company,” Weston said in a statement. “Lanham has been an inspiring and successful leader, and we wish him all the best as he pursues his other passions.”
With Napier leaving his post, will Rackspace place more focus on channel partners? We’ll stay on top of the coverage.
Follow CJ Arlotta on Twitter @cjarlotta for further updates on the story above.
