[roymurdock]

Apollo is a private equity firm, so they are most likely acquiring Rackspace because they see fat they can trim (read: laying people off, outsourcing labor, tax optimization) off a decently competitive company that they can possibly take public or sell in 5-10 years.

It's not so much about competing with Amazon, Google, etc. or advancing the state of the technology as much as making a bet that the brand is currently undervalued and that conditions in the cloud computing market will allow for a profitable exit in the medium term.

For examples of Apollo bets that have gone wrong see its LBO of Harrah's (basically bankrupt) or Linens 'n Things (bankrupt).

[pm90]

(Disclaimer: former employee of Rackspace) That is exactly how I read it. While Rackspace has been doing pretty well, its just not growing as fast as its competition and Wall Street in concerned.

It is a big shame though. Rackspace is one of the few Texas-born companies that managed to strike it big and still have a very egalitarian culture. They have a very interesting culture and I wish it was something that could go on; a lot of my former coworkers absolutely love that environment. But it doesn't look like it will last for much longer.

[charlesdm]

For a successful LBO, growth is largely irrelevant. What is relevant however, is that you can protect your existing market share. If you can buy a company for $1bn with $800m in debt and pay that down, and sell it for $1bn again 5 or 10 years down the line, you just made a cool $800m. If you can double the net profit, you'll be able to sell it for $2bn, etc.

[jdubs]

They've done amazing things for the community. I can only hope that Apollo group continues the local outreach!

[kingosticks]

I hope that fat doesn't include their free accounts for OSS projects and communities, that'd be sad.