Shares in Rackspace Technology fell just shy of 22% on Wednesday, its first day of trading on its second time out as a public company. But Rackspace CEO Kevin Jones says that regardless of what happened on Wall Street, the company has a major opportunity ahead of it as cloud demand only skyrockets during the coronavirus pandemic.
Rackspace began its existence in 1998 as a traditional web hosting company, eventually growing into one of the first direct competitors against Amazon Web Services, the retailer's cloud computing platform. It didn't take long for AWS to come to dominate the market, however, at the expense of Rackspace's business. Rackspace ultimately pivoted away from directly competing with AWS and towards providing services to help customers make the most of it.
Ultimately, amid plenty of competitive pressure, Rackspace was taken private in a $4.3 billion deal led by private equity firm Apollo Global Management. Fast forward to this year, and Rackspace filed for an IPO last month ahead of Wednesday's second debut on the markets.
What's different this time, Jones says, is that Rackspace isn't going to even try to compete with leading clouds AWS, Microsoft Azure, or Google Cloud. Instead, it partners with them, with a little help from friends like VMware. Rackspace's biggest focus is now helping customers take advantages from all three of the major mega-cloud vendors.
"We're just excited to reach this milestone, excited to be in public markets," Jones told Business Insider. "Today is day 1. We're not focused on today's stock price, and focused on the resting value over the long term. We're focused on multi-cloud. We're right in the middle of a tectonic shift. I'm not worried about the stock price today. We're really focused on the long run."
The right time to go public
The company's IPO plans were delayed, thanks to the onset of the ongoing coronavirus pandemic in the United States. Still, Jones says, the current situation hasn't created a negative impact at Rackspace — quite the opposite, he says, as demand is up, and so is the productivity of employees now working from home. These dynamics made this a good time to go public, Jones suggests.
"We had a lot of momentum before the pandemic and we saw sales accelerate during it," Jones said. "It gave us more confidence in the resilience of the business. We decided this would be the right time. Now as we look into the future, we're off to a great start. We see lots of opportunity."
Still, Rackspace may have some work to do to convince investors of that opportunity: As TechCrunch's Alex Wilhelm noted when the company first filed for this second IPO, while Rackspace generates significant revenue, its SEC filings also show that it holds a lot of debt and shows uneven growth rates.
Rackspace's plans as a public company
Now that Rackspace has gone public, it plans to focus on continued revenue growth, global expansion, and helping companies work with multiple clouds and artificial intelligence, Jones said.
What's more, Jones says that Rackspace has benefitted from the growth seen by AWS and Microsoft, both partners to the company. As more customers turn to Amazon or Microsoft for their own clouds, that just means more demand for Rackspace's services.
"The market was already in the middle of a tectonic shift to multi-cloud," Jones said. "We're still slammed with demands of customers that want to save money because of the pandemic. Cloud helps them do that. A lot of customers have to change their business model. Maybe their business model isn't working as well. Cloud is the best way to do that."
While Rackspace previously competed with AWS, it's going "all in" on selling professional services for AWS and hopes to become the biggest provider filling that need. Late last year, Rackspace acquired the AWS consulting company Onica.
Rackspace plans to look at other deals with companies that help customers with using multiple clouds. Already, Jones says he's seeing business with Microsoft and Google Cloud services accelerate dramatically, which reinforces the notion that it's on the right path.
"The Onica acquisition has been spectacular," Jones said. "It has been an absolute grand slam home run. Essentially we're exceeding every financial metric and every objective set out when we acquired the company."
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