
Rackspace Hires Morgan Stanley to Evaluate Options - AJ72
http://www.bloomberg.com/news/2014-05-15/rackspace-hires-morgan-stanley-to-evaluate-options.html
======
JohnTHaller
Rackspace's real strength is in their managed services. Either with a managed
dedicated server or managed cloud account. The level of support and assistance
you get is something that isn't even available from Amazon, Google, etc. It
seems, however, that Rackspace is feeling the pressure from both large and
small players and some businesses go with Amazon, Google, etc and do all the
OS and stack management in house while others go with the lower end
(features/price/SLA) of a Digital Ocean or similar.

Don't get me wrong, I think there's a place for all of them, and actually use
both Digital Ocean as well as a Rackspace managed dedicated and cloud setup.
But I think a lot of people are buying based on price and just accepting a
lower level of support in the process. Oddly, some folks seem surprised by the
lower level of support of some of these services (no phone support, lesser
monitoring, increased downtime, backups that are lost when the node fails,
etc), even several HN posters when these services have issues.

~~~
imsofuture
Rackspace has been dropping the ball on support, _big time_ , over the past
6-12 months. I'm not sure what's changed, but it's not for the better.

~~~
dpcan
My experience has been the opposite.

Live Chat help seems to fix just about every single problem we have on the
fly, and they open Tickets when it gets more complicated, with thorough and
fast follow-up.

I have never been happier with my hosting support, and I've used company after
company over the years. I've now been with Rackspace (Sites and Cloud Servers
specifically) the longest.

I should note that I ended up with them because they took over SliceHost (also
great support), so I didn't really "choose" Rackspace based on anything, but
loved SliceHost, and the transition was seamless, and the great support seemed
to follow.

~~~
imsofuture
No joke, they took away our ability to use chat support a few months ago.

Why? Because we're such an important client, that they want us to have a more
personal relationship, by forcing us to interact over the phone. I wish I were
kidding.

~~~
dpcan
This freaks me out. Live Chat is my life-blood, especially given my schedule
and number of clients. Particularly regarding issues with my Sites customers.

~~~
JohnTHaller
It's odd. I think of 'live chat' as cheap-o support manned by folks who likely
can't fix anything, since that's been my experience. To the point that I won't
use something for production if that's all they offer. The cheap guys offer a
live support linke, often offline, and call it 2/47 support. Well, if that,
the very inexpensive guys offer web-based tickets only. No phone, email, or
live chat.

Rackspace has folks that know how to fix a complicated issue on RHEL stack at
3am, which is nice. And, unlike a cheap host who has an SLA that guarantees
100% uptime but only refunds you for time lost, Rackspace's SLA incentivizes
them to fix things ASAP. Things like a dedicated box having a hardware failure
will be restored in an hour and they credit you 5% of your monthly fee for
every hour over that. Or 5% for each 30 minutes of downtime due to data center
issues (power, network, HVAC, etc). And they do make good on it.

~~~
imsofuture
Chat support is extremely helpful when it comes to minor issues. Sure, if
there's a core networking issue in the datacenter that's strangely impacting
my servers I want to be on the phone with a well-informed tech.

Rackers are a smart bunch, their first-level chat support is great for the
million minor issues I need solved. ("We've got a noisy neighbor, can you
check it out?", "Can you move this VM to a new host?", etc.)

That's 10 seconds of divided attention required from me vs 10 minutes of
dedicated attention for a phone call.

------
programminggeek
If your whole business relies on staying in step with giant competitors with
huge piles of money thrown off from other successful ventures to lower their
costs and prices more aggressively then you can, it's going to be an ugly
business in the long haul.

Price is a terrible competitive advantage because unless you have a
revolutionary cost structure to go with it, you're hosed once someone does
something reckless, like lowering below cost to drive you out of business.

Google and Amazon aren't going anywhere because they own search and ecommerce.
Hosting and infrastructure are nice businesses for both companies, but they
are fine without it. Rackspace without hosting and infrastructure revenue is
not a company.

------
smacktoward
Aaargh.

I love Rackspace. I was looking forward to being a happy Rackspace customer
until I was old and gray. And all the things I love about them would be the
first things to go after an acquisition.

Aaaaaaaaaargh.

~~~
yuhong
I wonder what would be a good acquirer.

~~~
rhizome
GoDaddy probably has the cash.

~~~
yuhong
And I think has improved since the Bob Parsons days.

~~~
bbunix
Verio might be a good match... NTT could afford it... and make them a player.

~~~
tbyehl
Verio was a player. The largest by some measures. Then they exercised an
option to force NTT to buy them out when the tech stock market tanked and have
barely been heard from since.

* I was in the first wave of NTT/Verio lay-offs.

------
us0r
You generally don't see announcements like this.

Are they having a hard time selling that's why it is out there? You would
think some of these companies you read saying things like "we missed the
cloud" would jump at this.

~~~
nodesocket
Really nobody left, RAX is too big and requires another public company, mainly
a blue blood to acquire them. IBM got Softlayer. Google, Amazon, and Microsoft
obviously have their own clouds. RedHat has its own PaaS OpenShift. Awkward
spot really. Perhaps Facebook wants to join the cloud hosting business, but I
doubt it, since they've just coughed up insane amounts of cash with Oculus and
whatsapp.

Smart play though, Morgan Stanley will figure out the details and likely find
a buyer eventually. MS is kind of like `The Wolf` from Pulp Fiction or Mike
Ehrmantraut from Breaking Bad, no questions asked problem solvers.

~~~
alaskamiller
Facebook has Parse, maybe if that demo matures to having RAX needs then it's
worthwhile.

~~~
akurilin
Parse was on AWS, at least before the acquisition, if I recall correctly.

------
Oculus
I really hope Mailgun will survive any acquisition or merger Rackspace goes
through. I love the quality of service they provide.

~~~
old-gregg
Mailgun cofounder checking in: we will, and yes - we will. ;-) Rackspace has
been a great home for our team, we continue to grow nicely, we're funded very
well and plenty of exciting things are on the roadmap.

------
bbunix
Corollary - customers look for exit options...

Glad we moved everyone off to AWS... pricing is an issue - everyone is
lowering prices dramatically... tough market.

------
rhizome
So, current RS customers, the history of these kinds of actions tell us that
right now is the best that Rackspace will ever be in the future.

------
dvanduzer
Rackspace over-bet on managed services, and under-bet on physical plant.

------
Aqueous
Rackspace should have invested more in PaaS. Its only offering that could it
semi-accurately call PaaS, Cloud Sites, is lacking - it supports few runtimes,
without things like git-based deployment that would enable it to fit into a CI
Pipeline, and it seems intended to host static websites with some dynamic
features rather than full-fledged web applications.

I think they are also failing by trying to differentiate themselves in a
business that will end up being much like a utility. When your business acts
like a utility it's kind of a race to the bottom on prices. Furthermore, in
attempting to differentiate themselves, they failed to characterize their
primary customer properly - the kind of person who interacts with RackSpace
directly is not the kind of person who calls support a whole lot, and yet the
quality of their managed support seems to be their sole differentiating
factor. My company did take advantage of managed support a few times, and when
we did so it was enormously helpful, but it wasn't enough to keep us there
when we saw lower-cost offerings elsewhere, because we have enough expertise
in-house to solve 99% of problems that come our way.

That said, I own RAX and I would very much like to see the stock stop tanking.
An acquisition proposition could send the price back up to near where I bought
it - and who knows? Maybe I'll end up trading it in for some more AMZN ( a
stock that has also been tanking, by the way.)

------
bruceb
Contemplating moving from RS to Linode. Anyone done the same? Was it worth it
for the savings?

~~~
127001brewer
For myself, I greatly appreciate having a service like Mailgun available to
Rackspace customers - does Linode (or another company) have a similar e-mail
service?

~~~
patio11
I'm pretty sure you can use Mailgun regardless of where you host at, FWIW.

~~~
hderms
Yeah, we use mailgun without Rackspace.

------
jamesjporter
I wonder what this means for the future of OpenStack?

~~~
tzakrajs
Same thoughts... hopefully HP wants to play ball.

~~~
kragniz
In the last few releases, HP has overtaken Rackspace in a number of
development metrics.

Poking around here is interesting:
[http://www.stackalytics.com](http://www.stackalytics.com)

------
rurounijones
Since stock price seems to be independent of actual company performance these
days...

Is Rackspace actually in financial trouble? Or is it a case of shareholders
moaning that their returns aren't good enough?

~~~
badamson
They're fine financially. >$300M Cash, $70M of debt (most of which are capital
leases). They say they've been approached by "multiple parties" so it's just a
matter of trying to get the best offer.
[http://www.sec.gov/Archives/edgar/data/1107694/0001107694140...](http://www.sec.gov/Archives/edgar/data/1107694/000110769414000025/rax8k_051514.htm)

~~~
rurounijones
Ok, so assume I am an idiot on this (not far wrong). Why is their stock price
not high? Just because they are not satisfying shareholders / wall street
analysts?

Are the slowly losing customers or see somethign in the future that will cause
trouble?

~~~
badamson
This sums it up nicely:
[https://news.ycombinator.com/item?id=7753787](https://news.ycombinator.com/item?id=7753787).

~~~
rurounijones
Thanks, that does.

------
hackaflocka
"inbound strategic proposals"?

god/alternative-deity help them.

