Rackspace cuts US workforce by 6 percent

Three months after going private, the cloud management firm is retooling.

Rackspace announced that it has initiated layoffs, cutting its US workforce by about 6 percent. Smaller reductions will happen in offices in other countries, based on "consultative processes governed by local laws," CEO Taylor Rhodes wrote in a blog post.

The cuts will primarily target corporate administrative expenses and management layers, he said, and are reflective of the rapidly changing cloud industry.

"Our U.S. layoffs are focused mainly in areas where our workforce has grown more rapidly than our revenue," Rhodes wrote. "We regularly find ourselves with more expertise than we need in some areas, and not enough in others."

The CEO listed parts of the business that continue to grow, such as the Rackspace Managed Security offering, its OpenStack and VMware private clouds, and its managed services for Amazon Web Services and Microsoft Azure. He said the company will continue to invest and grow in those areas.

"We are not backing down, but racing ahead," Rhodes wrote. "We expect that over a period of several years, Rackspace will be significantly larger in revenue, profit and headcount."

The move comes three months after the company went under private management, following a $4.3 billion deal with the private equity firm Apollo Global Management. Rackspace started focusing more squarely on customer support services last year after it had trouble competing as a cloud provider against major companies like Amazon, Google, and Microsoft. Rackspace is now one of the top managed service providers for AWS, with hundreds of engineers certified as experts on the AWS platform.

Rhodes said going private has given 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.

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