Rackspace announces US layoffs just three months after $4.3bn buyout

Three months after being taken private in a $4.3bn buyout, Rackspace has announced plans to lay off 6% of its US-based workforce.

Rackspace CEO Taylor Rhodes said in a blogpost the cuts will primarily be focused on the company’s corporate administrative expenses and management layers.

The company’s front-line support staff and product teams will be least impacted by the layoffs.

Rackspace did not reveal further details about where the layoffs will come from or the specific number of employees that would be affected, saying the job cuts will be in areas where the workforce has grown more rapidly than the revenue.

Rhodes said: “The U.S. layoffs and proposed international reductions are personally painful, but they are necessary and manageable,” adding that he is confident they can be accomplished without hurting customer service the company provides to its customers.

We expect that over a period of several years, Rackspace will be significantly larger in revenue, profit and headcount.

Fast-growing sectors of the company’s business, particularly its Managed Security, Hosted OpenStack and VMware clouds, and Managed Amazon Web Services and Microsoft Azure public cloud products, will not have any staff reductions.

“We will continue to invest and build our capabilities in these fast-growing lines of business. We have big ambitions, because the complexity and speed of change our customers are facing as they move into the multi-cloud world have never been higher,” Rhodes added.

Rackspace was established in 1998 as a managed hosting firm. In 2010, Rackspace contributed the source code of its Cloud Files product to the OpenStack project under the Apache License to become the OpenStack Object Storage component.

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

Rhodes said Apollo is giving Rackspace the flexibility to structure the business for longterm growth.

“Apollo shares our determination to make Rackspace bigger and stronger, not smaller, over the next few years,” he wrote.