Rackspace sells Cloud Sites hosting business to Liquid Web

Managed cloud and hosting company Rackspace today announced that it has sold its Cloud Sites business unit to hosting company Liquid Web. Terms of the deal were not disclosed.

Cloud Sites is a premium hosting service that starts at $150 per month. Rackspace still provides other cloud and hosting services for its customers.

“As Rackspace continues to focus on delivering expertise and Fanatical Support for the world’s leading clouds, while serving more enterprise customers, it has been divesting services that are not core to this strategy,” Rackspace said today in its quarterly earnings statement. The deal was signed in July and is expected to close before September 30. The unit will stay in Rackspace’s San Antonio headquarters, according to a statement from Liquid Web.

“It’s a good business, but it’s non-core,” Taylor Rhodes, Rackspace’s chief executives, told investors on the company’s quarterly conference call.

Based in Lansing, Michigan, Liquid Web was founded in 1997 and generates more than $90 million in revenue per year. The company has more than 30,000 customers, including Audi, FedEx, MTV, and Toshiba. Last year private equity firm Madison Dearborn Partners became a majority owner of Liquid Web.

This was the only strategic update that Rackspace provided in its earnings statement today. On August 4, following rumors that Rackspace was close to being sold to a private equity firm, Rackspace stock was halted, and in after-hours trading it was up more than 17 percent.

Just before its 2014 pivot, Rackspace disclosed in a regulatory filing that it was exploring opportunities “ranging from partnership to acquisition.” But four months later the company declared that it was no longer for sale.

In collaboration with NASA, Rackspace launched the OpenStack open source cloud software in 2010. In 2008 the company picked up cloud compute and storage technology through its acquisitions of Slicehost and Jungle Disk. That move was preceded by the creation of the first Amazon Web Services, EC2 and S3 in 2006, which effectively established the cloud infrastructure market.

In 2014 Rackspace announced a strategic shift, moving away from commodity cloud compute and storage infrastructure and toward the managed cloud message, with a strong emphasis on its “fanatical support.” The move was an acknowledgment that Rackspace could no longer keep up with AWS, Microsoft Azure, and other top public cloud infrastructure providers. These days, in addition to offering its cloud services with support included, Rackspace also helps customers deploy their applications on top of AWS and Azure.

The cloud infrastructure market has gone through extensive consolidation. Most recently Samsung bought Joyent. Also CenturyLink acquired Savvis and Tier 3, EMC bought Virtustream, and IBM bought SoftLayer. In October HP announced plans to shut down its Helion public cloud.

Rackspace stock was down more than 1 percent today in after-hours trading. The company beat analysts’ estimates on income and revenue for the second quarter of the year.