Rackspace dumps plans to sell

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Rackspace dumps plans to sell

Names new CEO.

Rackspace has abandoned plans to put itself on the market, deciding to end talks regarding a merger or acquisition and continue under the leadership of newly appointed CEO Taylor Rhodes.

The cloud provider told investors in May that it had engaged Morgan Stanley to evaluate offers to take over the company.

HP, IBM and US telco CenturyLink were all rumoured to have made offers since the announcement.

But after reviewing the potential suitors, the Rackspace board today said it had decided to terminate discussions and focus on re-accelerating revenue for the coming year.

"None of these proposals were deemed to have as much value as the expected value of our standalone plan," chairman and co-founder Graham Weston said in a statement.

"We concluded that the company is best positioned to drive value for shareholders, customers and Rackers through the continued execution of its strategic plan to capitalise on the growing market opportunity for managed cloud services."

He said the board was now evaluating a share buy-back program.

The news sent Rackspace shares down 16.5 percent in after-market trading. Its stock closed at US$39.34 on Tuesday on the New York Stock Exchange.

News of the proposed sale came just months after founder Lanham Napier announced he would retire as CEO.

Rackspace this morning named former president Taylor Rhodes as his replacement. Co-founder Graham Weston, who had been filling in, will step aside to become non-executive chairman.

Weston said Taylor had played a "critical role in the development and execution of the company's strategy to renew its focus on managed cloud market leadership, actions which are driving the reacceleration of the company's results and underpinning our positive outlook".

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