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Rackspace Doubles Down on OpenStack as CEO Retires

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Cloud hosting vendor Rackspace reported its fourth quarter and full-year fiscal 2013 results late Monday as CEO Lanham Napier announced his retirement from the company.

Rackspace reported fourth quarter revenue of $408 million, which represents a 16 percent year-over-year gain. Net income was reported at $21 million for the quarter, for a 30 percent year-over-year decline. For the full year, revenue came in at $1.5 billion. Looking forward, Rackspace provided first quarter 2014 guidance for revenue to grow between 2 and 3.5 percent. For the full year, Rackspace expects revenue growth to range between 15 and 18 percent.

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With things looking up for Rackspace, CEO Lanham Napier is now retiring.

“I’m proud that we were able to end 2013 on a strong note, especially because today I’m announcing that I’m retiring from my role as CEO of Rackspace,” Napier said during his company’s earnings call. “The truth is there’s no perfect time for a transition like this one, but I believe now is as good a time as many, and there are a number of reasons why.”

One of the key reasons is the continuing adoption of the open source OpenStack cloud platform, which is a project that Rackspace helped to create. Napier said that Rackspace’s transition to OpenStack has been challenging and has taken longer than anticipated. That said, he added that Rackspace’s ambitions for the game-changing transition that is OpenStack are massive.

“I wanted to stay at the company long enough to see the transition through, and I feel like we’re finally over the hump,” Napier said.

Graham Weston will be taking over for Napier as the Interim CEO. Napier noted that Weston is a co-founder of Rackspace and had been the CEO from 1999 until 2006, when he handed the CEO role over to Napier. Weston said during the call that Napier helped to lead Rackspace from a tiny San Antonio startup to a global leader in cloud computing with more than $1.5 billion in annual sales and more than 200,000 customers in 120 countries.

“I think as far as the CEO search goes, I think one of the advantages of the fact that I’ve been Executive Chairman throughout this time and one of the founders of the company, this allows us to really do the CEO search with as much diligence as possible, we’re not in a hurry to find a successor for Lanham,” Weston said. “I’ll remain in this role as long as necessary.”

Weston already has a solid strategy in place for the next round of Rackspace’s evolution. He noted that the early adopters of the cloud computing were primarily do-it-yourself tech enthusiasts.

“Rather than focusing on software development at the core of their business, they also took on operational burdens of making that infrastructure work,” Weston said. “Today, a much larger wave adoption is forming around a very different type of customer, pragmatic businesses, millions of them around the world, these businesses will want software engineers to focus on developing work that differentiates them into their core business rather than operating infrastructure and learning the end list succession of complex new tools.”

Weston added that the 200,000-plus customers that Rackspace serves today know that they can find cheaper, do-it-yourself hosting with a few keystrokes, but they choose Rackspace, because of the extra value of Rackspace services and expertise.

Moving into 2014, Weston said that he expect to see increased adoption of Rackspace’s OpenStack based private cloud offerings.

“We saw a lot of proof-of-concept action in 2012 and early 2013, and now we’re very happy to see that those proofs-of-concept are moving into production and projects,” Weston said.

Sean Michael Kerner is a senior editor at Datamation and Follow him on Twitter @TechJournalist

Photo courtesy of Shutterstock.

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