Rackspace's shares drop after it ditches plans to sell company

Rackpsace has abandoned its efforts to find a buyer and has chosen to remain independent while naming a permanent CEO to lead the company.

The company has promoted Taylor Rhodes, who had been serving as Rackspace's president, as the new CEO. Graham Weston, Rackspace's co-founder who had served as interim CEO and chairman since February, will now become non-executive chairman of the board. 

Rhodes will be charged with leading Rackspace's cloud strategy.

News of the decision did not bode well with the financial markets as the company's stock declined 16.5 percent in Tuesday after-market trading. The company's shares closed at $39.34 on the New York Stock Exchange.

Rumors emerged last week that CenturyLink (NYSE: CTL), which has been building up an arsenal of cloud and data center capabilities, was interested in acquiring the company.

While it did not specify who its potential suitors were, Rackspace said it had been approached by a number of parties that said they were interested in exploring a strategic relationship, including a possible partnership or an acquisition. Following what it said was a comprehensive review, the board of directors ended all merger and acquisition discussions.

Consolidation of the cloud services market has been an ongoing trend in recent years as companies like Rackspace look to stay competitive with market leaders such as Amazon Web Services and Google (NASDAQ: GOOG).

According to a recent Synergy Research report, second-quarter cloud infrastructure service revenues (including IaaS, PaaS and private and hybrid cloud) reached $3.7 billion.

For more:
- Reuters has this article

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