Rackspace UK staff on the move - just like its share price

CRN understands a number of UK staff have left the firm as Q1 guidance sparks big drop in hosting firm's share price

Rackspace's share price fell last night after it unveiled its first-quarter results, as a number of UK staff head for the exit.

Its Q1 results showed an annual spike in profits, up 78 per cent to $48.8m (£33.8m) on net revenue which jumped eight per cent to $518.1m. But despite the growth, its share price slipped from $22.56 per share at 4pm yesterday to $20.80 (down 7.8 per cent) a few hours later.

Analyst Megabuyte said the share price is "barely 4x 2016 EBITDA" and added that "despite consensus forecasts coming in the middle of guidance [2016 revenue expected to range between $2.98bn and $2.16bn]... investors clearly do not believe that the company will achieve these."

"[There is a] disconnect between the 4x EBITDA of Rackspace and the 17x to 18x of major datacentre operators, such as Equinix and Digital Realty, which provide much of the space for hosting providers such as Rackspace," the analyst added.

The results come as CRN understands that a number of the company's UK staff have left in recent weeks.

Giri Fox, Rackspace's former director for customer technology services, has left the company for SoftwareONE, and said on his LinkedIn page that he is currently on gardening leave.

Floyd Toussaint Kaye, a former business development manager at Rackspace, recently popped up at NIU Solutions; and Damien Harper, a Rackspace SMB sales manager, claims on LinkedIn to be on the hunt for a new opportunity . CRN understands that two other business development consultants have also left the firm in recent weeks.

The staff moves come a few months after Rackspace's senior sales manager Ian Moyse left the firm, ahead of his appointment at Axios Systems, where he is sales director.

Earlier this year, CRN reported that the likes of HP, IBM and AWS were tipped as potential buyers for Rackspace amid industry speculation that the firm is up for sale. Sources claimed the company is struggling to compete with its rivals and that recent moves - such as a large share buyback programme - indicates its intentions to sell.

One source told CRN that the recent staff departures could be linked to the pressure it is facing in the market.

"Rackspace has continued to be under increasing market pressures from a rapidly developing cloud market, with customers choosing far cheaper and more functional public cloud offerings from the big three - Amazon, Microsoft and Google - over a high-priced market offering from Rackspace," he said. "[There are some] rapid changes afoot."

Rackspace declined to comment on the claims. But CEO Taylor Rhodes said the company has continued to "build power" behind its managed cloud strategy and added that demand for its managed services for AWS and Microsoft is "scaling rapidly".