Rackspace Slashes 6% of Its U.S. Workforce

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Rackspace, the managed cloud provider that’s made big investments in the channel in recent years, is cutting its U.S. workforce by about 6 percent in areas where its employee count has outpaced revenue.

The layoffs will affect about 276 of the company’s 4,600 workers in the United States, according to Rackspace spokesperson Monica Jacob. This is a one-time event and there will not be a second wave of layoffs, she said.

“Rackspace made a substantial cut in the early part of the year so we can continue to focus on our mission moving forward,” she said.

In his blog, Rackspace CEO Taylor Rhodes said the company has targeted the cuts “primarily toward our corporate administrative expenses and management layers, while striving to create the least impact to our frontline Fanatical Support and product teams.”

“We are proposing somewhat smaller reductions in our offices in other countries, through consultative processes governed by local laws,” he said. “The U.S. layoffs and proposed international reductions are personally painful, but they are necessary and manageable. We’re confident we can accomplish these reductions without any effect on the expertise and exceptional customer service we provide to our customers.”{ad}

The U.S. layoffs are focused mainly in areas where Rackspace’s workforce has “grown more rapidly than our revenue,” Rhodes said.

“Other parts of our business – such as our Rackspace Managed Security offering, our OpenStack and VMware private clouds, and our managed services for Amazon Web Services and Microsoft Azure – are growing rapidly, at annualized rates in the high double digits,” he said. “We will continue to invest and build our capabilities in these fast-growing lines of business. We expect that over a period of several years, Rackspace will be significantly larger in revenue, profit and headcount.”

In November, Rackspace went private under the ownership of a group led by private equity investor Apollo Global Management.

“Apollo is giving us the flexibility to structure our business for long-term growth, in ways that would be difficult under the 90-day shot clock of the public markets,” Rhodes said. “Apollo shares our determination to make Rackspace bigger and stronger, not smaller, over the next few years.”